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Inflation brought under control faster than expected
Headline inflation has dropped back into Bank Indonesia’s target range, yet analysts do not expect the central bank to lower interest rates anytime soon.
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A man transports vegetables he bought at a wholesale market on his motorbike in Jakarta on April 13, 2022. (AFP/Bay Ismoyo)
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nflation has dropped to the lowest level in 12 months and is now back within Bank Indonesia’s (BI) target range, yet a swift reduction of interest rates is not expected.
Analysts believe currency volatility and a lack of clarity about the monetary policy of the United States Federal Reserve (Fed) will deter BI from loosening the reins for the time being.
As Statistics Indonesia (BPS) announced on Monday, headline inflation, or consumer price index (CPI) growth, dropped to 4 percent year-on-year (yoy) last month from 4.33 percent in April.
That means CPI growth now sits exactly at the upper limit of BI's target range of 2 to 4 percent. The central bank itself had only expected to reach that milestone in the third quarter of this year.
Monthly inflation also dropped as the rate fell to 0.09 percent in May from 0.33 percent logged in April.
The headline inflation figure is in line with a forecast from Moody's Analytics but lower than predictions of Bank Permata and KB Valbury Sekuritas, respectively, for CPI growth of 4.24 and 4.25 percent.
