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Hopes rise for BI-Rate cut on lower inflation, Fed signals
The country's lowest inflation since February 2022 and signals from the Fed could give Bank Indonesia space to cut its rates, likely in the fourth quarter, economists say.
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A chili trader arranges a display at his stall on June 10, 2024 at Senen Market in Central Jakarta. (Antara/Akbar Nugroho Gumay)
T
he lowest inflation in more than two years, coming on top of monetary policy signals from the United States, could give Bank Indonesia (BI) the space to reduce its interest rates before the end of the year.
Statistics Indonesia (BPS) interim head Amalia Adininggar Widyasanti announced at a press conference on Thursday that consumer price index (CPI) growth slowed to 2.13 percent year-on-year (yoy) in July, the lowest rate since February 2022.
Consumer prices have been decreasing for three months in a row, with the CPI dropping 0.18 percent month-to-month (mtm) in July.
Amalia said annual headline inflation rate was being pushed up chiefly by the “food, beverages and tobacco” expenditure category.
Nevertheless, July’s volatile food inflation of 3.63 percent marks a new low this year and a significant improvement from 5.96 percent logged in the preceding month.
Headline inflation has been declining steadily since March 2024 and has remained since May 2023 within BI’s target range of between 1.5 and 3.5 percent this year and between 2 and 4 percent last year.
