indo03

Indonesia’s Feb inflation rises, but core inflation slows more than expected

JAKARTA : Indonesia’s annual inflation picked up slightly in February, but its core inflation decelerated more than expected, data from its statistics bureau showed on Wednesday.

The Consumer Price Index rose 5.47 per cent on a yearly basis in February, roughly in line with the median forecast in a Reuters survey of analysts of 5.44 per cent and above January’s 5.28 per cent.

Core inflation unexpectedly slowed to 3.09 per cent, compared with analysts’ prediction that it would stay around January’s level of 3.27 per cent.

Rising prices of fuel, rice, cigarettes and air fares contributed to the acceleration of headline inflation.

Indonesia’s central bank has raised interest rates by 225 basis points since August to guide inflation back to within its target range of 2 per cent to 4 per cent.

At its February policy meeting, Bank Indonesia (BI) said the current benchmark rate level of 5.75 per cent was sufficient to get headline inflation to return to within the target band in September and for core inflation to stay within target throughout the year.

Bank Permata’s economist Josua Pardede said the data showed core inflation was “well anchored”. Combined with stability in the rupiah exchange rate, this should mean BI could keep interest rates unchanged, he said, though he warned of a potential seasonal rise in prices ahead of the Muslim fasting period that starts later this month.

Faisal Rachman, Bank Mandiri’s economist, agreed the data were unlikely to change BI’s policy stance.

“What needs to be anticipated that may change (the stance) is the FOMC meeting later in March 2023,” he said, referring to the U.S. Federal Open Market Committee meeting set for March 21-22.

BI, which reviews Indonesia’s monetary policy every month, will hold its next meeting on March 15-16.

Source: Reuters