Indonesia inflation rate beats forecasts

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JAKARTA- Indonesia’s February inflation rate beat forecasts on surging food prices, government data showed on Friday, but stayed within the central bank’s targeted range, reinforcing market views that any rate cuts will come only in the second half of 2024.

The monthly inflation rate accelerated to 2.75 percent , compared with 2.57 percent in January, according to the statistics bureau. A median forecast of economists polled by Reuters had expected inflation of 2.60 percent .

Bank Indonesia (BI) has targeted inflation within a range of 1.5 percent to 3.5 percent this year.

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In February, BI Governor Perry Warjiyo reiterated the central bank’s view that the window to start cutting interest rates is in the second half of 2024, with considerations of inflation and movements in the rupiah’s exchange rate.

Indonesia’s annual inflation rate has stayed within the central bank’s target range since mid-2023, following BI’s decision to hike interest rates a total of 250 basis points between August 2022 and October 2023.

“Inflation is picking up, but is still within BI’s target range,” said Maybank Indonesia economist Myrdal Gunarto. “BI will maintain interest rates until there is easing global risk, especially to inflation.”

Gunarto forecast annual inflation could rise to 2.9 percent in April, coinciding with the Muslim holy month of Ramadan that starts in March and will spill over to April. During Ramadan, food demand and prices usually rise. He forecast inflation to ease to 2.8 percent by year-end. – Reuters

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