Consumer prices fell for the third time this year in September, putting the full-year inflation target on track
onsumer prices fell for the third time this year in September, putting the full-year inflation target on track.
According to data from the Central Statistics Agency (BPS), the consumer price index (CPI) fell by 0.05 percent month-to-month (mtm) in September, the third wave of deflation after February and January.
The result brought the overall year-to-date inflation rate to 2.24 percent, which is within the 4 percent target ' plus or minus 1 percent ' set by the government for 2015.
On an annual basis, inflation surged 6.83 percent. Meanwhile, core inflation stood at 0.44 percent in September and was 5.07 percent higher than the same period in 2014.
BPS head Suryamin said the government and Bank Indonesia (BI) kept inflation under control last month with their Regional Inflation Controlling Team (TPID).
'There are even TPIDs in regions not included in our pool of survey samples. This is important because inflation surely impacts people's purchasing power,' he said in a press conference on Thursday.
The September deflation was triggered by a decline in prices of food and transportation, as shown by the data. Food prices dropped 1.07 percent mtm and those of transportation, communication and financial services dropped 0.4 percent mtm.
Spices became the food segment to post the steepest deflation with 6.08 percent, while egg, milk and their derivative products recorded deflation of 0.26 percent.
Suryamin said food prices had returned to normal, following the Idul Fitri holidays. 'Meat prices declined as well, with the price of chicken posting the biggest decline in the meat category,' he said.
In transportation, air transportation prices posted a decline of 0.09 percent on a monthly basis, while gasoline prices dipped 0.02 percent from the previous month.
'Haze in several areas supposedly played a role in the decline of airline ticket prices,' Suryamin said.
The 0.05 percent deflation rate was apparently lower than BI's own forecast. It predicted earlier that the rate would hover at 0.04 percent, eventually leading to year-on-year (yoy) inflation of 6.9 percent in 2015.
Meanwhile, despite the latest development, economists doubt that it will drive BI to cut its key policy rate to spur growth. BI has kept its benchmark rate at 7.5 percent since February 2015.
Barclays economists Wai Ho Leong and Angela Hsieh wrote in a research note that the window for monetary easing had closed this year, even though inflation was likely to trend lower toward year-end on a lower base.
'Indeed, the recent heightened financial volatility and growing stress on the rupiah have left BI no room for further monetary easing, in our view. As such, we maintain our forecast for Bank Indonesia to remain on hold throughout the rest of the year,' the note says.
Barclays maintains its 2015 inflation forecast at 6.6 percent.
Glenn Maguire, ANZ chief economist for South Asia, ASEAN and Pacific, said that the latest disinflation was only marginal, arguing that price pressures were diverging between tradables and non-tradables inflation.
'['¦] as they roughly have equal weighting in the CPI basket, it speaks more of inflation stasis rather than a clear directional trend in inflation, making itself apparent in the coming months,' he said.
'For this reason, we do not see inflation dynamics in Indonesia alone creating sufficient policy space to allow Bank Indonesia to immediately pursue a more accommodative and growth-supportive monetary policy,' Maguire said.
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