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Inflation slows more than expected but don’t hold your breath for BI rate cut
Maintaining a trend that began in March, inflation dropped to 3.5 percent last month, which is lower than market estimates, yet experts do not expect Bank Indonesia to cut its benchmark interest rates this year, as imported inflation remains a risk.
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Vendors wait for customers at a traditional market in Tangerang, Banten, on April 3, 2022. (AFP/Adek Berry)
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nflation dropped more than expected last month, maintaining a trend that began in March, yet experts do not expect Bank Indonesia (BI) to cut its benchmark interest rates this year, as imported inflation remains a risk.
Statistics Indonesia (BPS) revealed on Monday that annual consumer price index (CPI) growth stood at 3.52 percent in June, beating Moody’s Analytics estimate of 3.8 percent.
“Annual inflation has seen a consistent decline since March 2023,” BPS official Pudji Ismartini said in a press briefing on Monday.
The latest reading marks a further decline from May, when the inflation rate dropped to exactly 4 percent, which marks the upper end of BI’s inflation target range of 2 to 4 percent.
CPI growth remains well above central bank targets in many other countries around the world.
Transportation was the biggest driver of inflation in Indonesia last month, as prices in this expenditure group were up 10.18 percent year-on-year (yoy).
In a month-to-month (mtm) comparison, CPI rose 0.14 percent in June, with food, beverages and tobacco alone accounting for 0.1 percentage points as prices in this group rose 0.39 percent from May.
