Bank of Korea Warns Wage Surge Could Trigger Inflation if Economic Growth and Supply Shock Align

According to the Bank of Korea, on July 21, the central bank expressed concerns that wage increases led by semiconductor bonuses could drive inflation if three conditions converge simultaneously: broad wage growth, strong economic expansion enabling companies to pass costs to consumers, and supply-side shocks from potential U.S.-Iran conflict escalation.

The bank cited historical experience from 2017-2018, when a sharp minimum wage hike of 16.4% sparked widespread wage increases, yet consumer price inflation remained subdued at around 1% due to weak economic conditions. A bank official stated: "Companies need strong demand to pass cost increases to prices. This time, both wage growth and robust economic conditions could occur together, heightening inflation risks."