JAKARTA: Indonesia’s annual inflation rate cooled slightly in April as pressure from some food prices eased as the harvest season began, the country’s statistics bureau said on Thursday (May 2), staying within the central bank’s 1.5 per cent to 3.5 per cent target range.
The Consumer Price Index rose 3.00 per cent on a yearly basis in April, compared with the 3.06 per cent forecast by economists polled by Reuters and March’s 3.05 per cent.
The annual core inflation rate, which strips out volatile food prices and prices controlled by the government, accelerated slightly to 1.82 per cent in April, from 1.77 per cent in March.
Volatile food inflation was recorded at 9.63 per cent last month, down from 10.33 per cent the previous month, with rice stocks improving at the start of harvest season.
The bureau said prices of rice, chillies and eggs declined on a monthly basis.
Inflation in Southeast Asia’s largest economy has been within Bank Indonesia’s (BI) target range since mid-2023, but the central bank last week raised its policy rates to support the rupiah currency amid global uncertainty about the timing of any US monetary easing and wars in Ukraine and the Gaza Strip.
The rupiah, which has fallen to four-year lows against the dollar on the risk-off sentiment in markets, strengthened slightly after the data was released. The currency has been trading around 16,200 per dollar since the middle of April.
Myrdal Gunarto, an economist with Maybank Indonesia, said price pressures should continue to gradually decrease, as household spending in Indonesia typically peaks during Eid al-Fitr, which fell in April this year.
However, he also noted risks of imported inflation from the rupiah’s depreciation and a potential rise in oil prices due to tensions in the Middle East.
“BI is more concerned with the rupiah, as we can see from its latest policy statement,” Myrdal said, adding the central bank’s room to ease monetary policy would likely depend on when the Federal Reserve starts cutting US rates.
