Indonesia’s headline inflation was widely stable in the month of October. On a year-on-year basis, the consumer price inflation came in at 1.44 percent, a slight acceleration from September’s 1.42 percent. Today’s figure marks the fifth consecutive month that Indonesia’s inflation has remained below the central bank’s target band of 2 percent to 4 percent.
On a month-on-month basis, the CPI rose 0.07 percent, countering the fall seen in September. Volatile food prices drove the rise, with a 0.40 percent rise. On the contrary, government-controlled prices continued to fall, though the pace of fall decelerated a bit.
Core inflation, which excludes volatile food and government-controlled prices, rose 0.04 percent in the month, the slowest pace of rise seen in four months.
Most non-food components were either widely stable or saw modest gains. The sharpest rise was seen in restaurants and health prices, while the main drags were seen in transport and personal care and other services.
“With economic activity still sluggish and consumer sentiment weak, price pressures are likely to remain subdued for some time yet”, said ANZ in a research report.
Low inflation underpins the case for further easing, but the central bank is of the view that quantitative measures are more effective than policy rate cuts in stimulating the economy.
“To be clear, BI has kept the door to additional rate cuts open. But unless concerns about external stability dissipate materially, the central bank is more likely to keep its policy rate unchanged, in our view”, added ANZ.
