By Stefanno Sulaiman and Fransiska Nangoy

JAKARTA- Indonesian prices rose at their slowest rate in almost three years in September as the pace of food-price inflation eased, giving the central bank ample room to loosen monetary policy to stimulate economic growth.

Annual inflation reached 1.84 percent, Statistics Indonesia said on Tuesday. That was the lowest since November 2021, LSEG data showed.

The figure compared with 2.12 percent in August and the 2.00 percent median of analyst estimates in a Reuters poll. It also stayed within Bank Indonesia’s inflation target range of 1.5 percent to 3.5 percent.

Food prices are the biggest contributor to inflation figures but their rate of growth eased to 2.57 percent versus August’s 3.39 percent.

Core inflation, which excludes volatile food prices as well as government-controlled prices, was 2.09 percent versus 2.03 percent in the poll.

An abundant supply of food material and the government’s policy to maintain price stability for strategic commodities will give a lot of “room for BI to loosen its monetary stance,” said Maybank Indonesia economist Myrdal Gunarto.

BI is likely to cut its policy interest rate to 5.25 percent by year-end, Myrdal said, rather than 5.75 percent as he earlier forecast.

BI last month lowered the rate for the first time in over three years to bolster growth amid slow inflation – by 25 basis points to 6.00 percent – hours before a 50 basis point cut in the US.

BI will cut interest rates twice more this year following a surprise reduction on Sept. 18, a Reuters poll of economists predicted, as a stronger rupiah and subdued inflation allows the central bank to focus on supporting growth.

In cutting rates just hours before the US Federal Reserve slashed its policy rate by 50 basis points last week, BI Governor Perry Warjiyo signaled a policy shift from keeping the rupiah currency stable to a balance between that and economic growth.

Warjiyosaid the Fed’s clearer direction on monetary policy provided BI with an opportunity to cut rates.

With a series of US rate cuts expected, further BI reductions are on the cards with less concern about hurting the currency, economists said. – Reuters