JakartaPost-June 5, 2023
Inflation 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. The food, beverages and tobacco segment was the biggest contributor to monthly inflation in May, according to the BPS data, while consumer prices in the apparel and footwear category as well as in transportation actually dropped last month. Core inflation, which has become the de-facto basis for BI’s interest rate policy, eased to 2.66 percent yoy in May from 2.83 percent in April. The indexes for volatile food prices and administered prices also slowed to 3.28 percent yoy and 9.52 percent yoy, which compares to 3.74 percent yoy and 10.32 percent yoy in the preceding month. Read more at:
