Issue Risks to Korea's inflation path from oil prices, exchange rates and demand-side pressure

Summary

For inflation, the Bank of Korea names international oil prices, exchange rate movements and demand-side pressure as the key risks. A deterioration in the Middle East that drives oil prices higher would push inflation above the baseline. A broad spread of demand-driven price pressure across many items as the economy recovers is another upside risk. On the other side, larger-than-expected declines in oil prices and the exchange rate would weaken the forces pushing prices up. Stronger government price stabilisation measures are also listed as a factor that could lower the inflation path. Like growth, inflation is thus seen as facing risks in both directions.