Indonesia posted its lowest monthly inflation in five years in June despite the usually high seasonal food prices before the Ramadhan month, due to stronger monitoring of food supply and distribution by Bank Indonesia'€™s (BI) regional inflation control teams (TPID).

The nation'€™s consumer price index (CPI) rose 0.43 percent month-to-month in June, taking annual inflation during the month to 6.7 percent, the Central Statistics Agency (BPS) reported on Tuesday.

The monthly inflation rate is at the lowest level in five years although food prices normally surge in June in anticipation of Ramadhan. Since 2010, monthly inflation has always exceeded 0.55 percent during the month of June, with the figure even topping 1.03 percent last year, according to BPS data.

The BPS attributed the satisfactory inflation levels to the well-coordinated efforts between the government and the central bank to control food supply and distribution.

Earlier this year, BI Governor Agus Martowardojo stated that he would deploy more resources to TPID branches across the archipelago to more seriously monitor the supply-side inflation affected by fluctuations in food supply.

'€œIf we look back over the last few years, the management of food supply and distribution has been better this year, which is noteworthy as food prices normally rise in June prior to the fasting period,'€ BPS head Suryamin told a press conference at his Jakarta office on Tuesday.

Inflation in June was driven by the increase in prices of several food commodities, such as eggs and chicken, as well as transportation costs, which had been on the upward trajectory in anticipation of the exodus period following Ramadhan, according to Suryamin.

Some commodities such as shallots and onions saw a double-digit monthly price increase in June due to a shortage in supply, but overall inflation was relatively benign as other food commodities did not face similar circumstances.

On a year-on-year basis, the annual headline inflation of 6.7 percent in June was the first time the figure fell below 7 percent in a year. Core inflation '€” the long-term measurement of price levels that excludes the prices for volatile and government-controlled commodities '€” stood at 4.8 percent in June, unchanged compared to a month earlier.

The June inflation reading was in line with the central bank'€™s estimates, proving that overall price levels in the economy were on the downward trajectory, BI spokesperson Peter Jacobs said on Tuesday.

BI targeted headline inflation to stand in the range of 3.5 to 5.5 percent this year, before aiming to push it down to 3 to 4 percent next year.

The benchmark BI rate has remained unchanged at 7.5 percent for seven consecutive months since
December, with the central bank noting that both the interest rate level and the tight-bias monetary policy were still in line with developments in Indonesia'€™s inflation and external balance.

'€œOverall, we think the drop in headline inflation and the stability in core inflation will continue to offer comfort to Bank Indonesia,'€ Barclays Bank economist Wai Ho Leong wrote in a research note released on Tuesday. '€œWe expect the next move from BI to be easing, likely in the first half of 2015.'€

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