Persistent inflation gives President Lee grounds to consider price controls

A staff member passes by gift sets displayed for the Chuseok holiday at a supermarket in Seoul, Wednesday. Newsis

Consumer prices in Korea have repeatedly breached the 2 percent inflation target, underscoring ongoing instability and possibly giving President Lee Jae Myung further justification for government-led price control measures.

According to the Ministry of Data and Statistics, Thursday, consumer prices rose 2.1 percent over a year earlier in September, after slowing to 1.7 percent year-on-year in August.

Last month’s inflation rebound came after inflation stayed above the Bank of Korea’s 2 percent target from January to April, briefly dipped to 1.9 percent in May and then rose back above 2 percent for the next two months.

The ministry attributed the rise above 2 percent to increasing prices of processed items, livestock, seafood and other staple goods.

In September, processed items jumped 4.2 percent, contributing 0.36 percentage points to the overall inflation rate.

Among the most affected were coffee, which surged 15.6 percent; bread, up 6.5 percent; fisheries, up 6.4 percent; and livestock products, up 5.4 percent.

Dining-out prices increased 3.4 percent, driven by higher delivery fees and the base effect of last year’s holiday discount promotions.

Economists have noted that the president specifically pointed to food prices as a key factor behind persistent inflation, suggesting it could open the door for government intervention to stabilize prices.

“The Lee administration prioritizes government-led policies, and it could directly intervene in the market if it deems the current situation unstable,” said Shin Se-don, professor emeritus of economics at Sookmyung Women’s University.

He referred to the president’s remarks during a Cabinet meeting, Tuesday, in which Lee asked Ju Biung-ghi, chairperson of the Fair Trade Commission, whether price control measures could be imposed on companies.

The president said that the prices of food and daily necessities in Korea are more than 1.5 times higher than the OECD average.

He argued that major manufacturers and producers have established monopolistic structures, leading to inflated food prices and excessive profits.

“If companies are making unfair profits and burdening citizens, then such systems should not be maintained,” Lee said.

Lee also referenced historical punishment for hoarding, noting that in the 1392-1910 Joseon Dynasty, hoarding goods was punishable by death, and that it is the government's responsibility to control such practices.

“Policy cannot defeat the market, but the market also cannot ignore government policy,” he added, emphasizing the need for government intervention to address high inflation.

Shin Il-soon, an economics professor at Inha University, also considered government-led price controls likely, noting that even the previous administration of ousted President Yoon Suk Yeol, which prioritized market-led growth, intervened in the prices of certain goods when necessary.

“The scale of intervention could be broad, considering that food prices are directly tied to domestic demand, which Lee is eager to boost in order to improve people’s livelihoods,” Shin said.