Indonesian headline inflation slowed for the sixth consecutive month in August. On a year-on-year basis, inflation eased to 1.32 percent from July’s 1.54 percent. Meanwhile, inflation came in at -0.05 percent on a sequential basis in the month.
Largest fall was recorded by the food prices, coming in at -0.86 percent, whereas transport prices came in at -0.14 percent. Other major components saw rises, with personal care and other services recording the biggest gain, followed by education services.
Accordingly, core CPI, which excludes volatile food and government controlled prices, rose 0.29 percent. The big picture is that price pressures will continue to be subdued on soft domestic demand in the midst of the pandemic, which has continued to escalate in Indonesia. The number of daily new infection cases hit a new record high last week. The continued virus spread has in turn delayed the rate of economic reopening.
Soft growth and inflation dynamics call for further policy support. Nevertheless, BI is of the view that quantitative measures would be more effective than policy rate cuts in stimulating the economy, noted ANZ in a research report.
