Annual Inflation In Indonesia Drops

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Annual Inflation In Indonesia Drops

Annual Inflation In Indonesia Drops To 2.28% During September

According to official data, the annual inflation in Indonesia dropped to around 2.28% during the month of September. As per the market estimates, this inflation reading was pretty much the same as they were expecting.

In addition, the Indonesian central bank had also set a lower & upper range of inflation. Based on this, the inflation is actually close to the lower end of the inflation set by the central bank.

Inflation Down From 3.27% To 2.28%

During August, the inflation reading in Indonesia was 3.27%, which dropped further to 2.20% in the last month. The inflation during September was one of the lowest and was only seen in February 2022.

The core inflation also went down during September, which is actually good news for Indonesian consumers. Just a month earlier, core inflation was 2.18%, which dropped to around 2% in September.

Indonesia is regarded as one of the largest economies in Southeast Asia, where inflation peaked by touching a reading of 6%. This sudden jump in inflation was recorded when the government reduced the subsidy it was offering on fuel prices.

To solve the inflation problem, Indonesia's central bank introduced 225 bps rate hikes during a period of 8 months in 2023.

As per the inflation target set by Bank Indonesia, the core CPI must be between 2 - 4%. In 2024, the inflation target will be further revised down to around 1.5 - 3.5%.

According to an economist from DBS, the drop in inflation during September was highly expected, given the economic conditions in Indonesia.

Looking ahead, the BI is expected to be less pressurized, given that inflation is easing down every month. However, any rate cuts by the BI are not expected as the Rupia is still very weak against the USD.

The only problem that can be driven from the recent reading is that inflation associated with rice is actually rising. Compared with last year, the retail prices of rice have jumped by 18.44%, which is making it difficult for the normal Indonesian consumer.

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