JAKARTA: Indonesia saw its inflation rate drop to its lowest level in nearly three years, with prices rising by just 1.84% in September. This marks a significant slowdown from August’s 2.12%, largely due to the easing of food price inflation, according to data from Statistics Indonesia and LSEG.
This inflation rate is also below the 2% expected by analysts and remains within Bank Indonesia’s (BI) target range of 1.5% to 3.5%. The decline in food prices, the biggest contributor to inflation, played a crucial role, with their growth rate slowing to 2.57% from 3.39% in August.
Core inflation, which excludes volatile factors like food and government-controlled prices, stood at 2.09%, slightly higher than the 2.03% predicted in a Reuters poll.
Maybank Indonesia economist Myrdal Gunarto highlighted that the combination of an abundant food supply and government efforts to stabilize key commodity prices offers BI room to ease its monetary policy. He expects BI to further reduce its policy interest rate to 5.25% by the end of 2024, a revision from his earlier forecast of 5.75%.
In September, BI cut its interest rate by 25 basis points to 6.00%—the first reduction in over three years—shortly after the U.S. Federal Reserve made a 50 basis point cut.
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