Inflation reversed its downward trajectory as it accelerated for a second consecutive month on spiking food prices, underscoring the challenge faced by the central bank as the economy encounters cooling growth and rising price levels
nflation reversed its downward trajectory as it accelerated for a second consecutive month on spiking food prices, underscoring the challenge faced by the central bank as the economy encounters cooling growth and rising price levels.
The Central Statistics Agency (BPS) announced Monday that monthly inflation surged to 0.5 percent in May, taking year-on-year inflation to 7.15 percent, the highest level this year.
Last month's inflation percentages were higher than market expectations, with most economists predicting the level would stand at around 7 percent.
Bank Indonesia (BI), the central bank, cut interest rates in February as it forecasted inflation to fall below 4 percent this year, but such a target might now be at risk as monthly inflation has not fallen below 6 percent this year.
'The harvest season has already passed, bringing some food prices back to normal,' analysts from Trimegah Securities wrote in a research note distributed on Monday prior to releasing its data, adding that the jump in price levels was likely driven by the surge in red chili and onion prices.
'We expect inflation to continue rising in the next two months as a result of an electricity price hike in May and seasonally higher food prices closer to Muslim Eid festive season in mid-July,' they explained.
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