The headline inflation of Indonesia slowed down for the second consecutive month in October. On a year-on-year basis, the consumer price inflation decelerated to 3.13 percent. The slowdown was widespread, with core rate, administered prices, and volatile food inflation all decelerating.
Sequentially, the headline inflation edged up by 0.02 percent, following a 0.27 percent fall in the prior month. The rise mainly showed a slower pace of decline in volatile food prices, which dropped 0.47 percent, as compared with September’s -2.26 percent.
Core inflation, which strips volatile food and government-controlled prices, rose 0.17 percent sequentially in October, slower than the 0.29 percent rise seen in the prior month. Categories such as housing, clothing, health and education saw prices rise further, but at a slower rate than the month before.
“Inflation, which is likely to stay comfortably contained within the central bank’s 2.5-4.5 percent target band, is not a hurdle to further easing. As long as external stability is maintained, we see scope for at least one more 25bp rate cut in BI’s easing cycle, bringing the policy rate to 4.75 percent, probably by year-end”, said ANZ in a research report.
