SEOUL — The Bank of Korea warned on Wednesday that large bonus payments and wage increases linked to the artificial intelligence boom could add to inflationary pressures across South Korea’s economy, even if energy prices ease following signs of reduced tensions in the Middle East.
In its semi-annual inflation report, the central bank said consumer price growth was expected to remain above its medium-term target through next year, citing a combination of elevated energy costs, currency-related pressures and rising wages in technology industries. Governor Shin Hyun-song said policymakers would continue responding to inflation risks until price growth showed clearer signs of returning to target levels.
“We will actively respond until we are certain that inflation is stabilising towards the target level,” Shin told a press conference after the report’s release, according to the Bank of Korea.
The central bank said inflation was likely to remain around 3% during the second half of 2026 and continue exceeding its 2% target next year. Consumer inflation accelerated to 3.1% in May, the highest level in more than two years, according to official data cited in the report.
Bank officials said the rapid expansion of the AI sector, particularly among semiconductor manufacturers, had led some companies to grant unusually large bonuses and salary increases as competition for skilled workers intensified. The report warned that if those wage gains spread beyond the technology sector, they could generate broader inflationary pressures through higher production costs and stronger household spending.
“Should wage increases spread beyond the semiconductor industry to other sectors of the economy, upward pressure on inflation could intensify further through both higher production costs and stronger consumer demand,” the central bank said in the report.
The warning comes as South Korea’s economy benefits from strong demand for advanced semiconductors used in AI systems. Industry analysts have linked the sector’s growth to rising exports and improved corporate earnings, although the Bank of Korea said the resulting wage pressures could complicate efforts to contain inflation.
The report also noted that higher oil prices and a weaker won had contributed to inflationary pressures this year. While officials said petroleum-related price increases could moderate if geopolitical tensions ease, they cautioned that energy-driven cost increases often spread to other goods and services over time.
Minutes from the central bank’s previous policy meeting, released earlier this week, showed that a majority of board members favored preparing for tighter monetary policy amid persistent inflation risks. The Bank of Korea’s next policy meeting is scheduled for July 16.
