Indonesia Inflation


Inflation continues to decelerate

In July, consumer prices increased 0.67% over the previous month, which was above the 0.55% rise recorded in June. Prices were higher in all categories of the CPI basket. In particular, prices in the food category increased 1.84% month-on-month, up from the 1.27% rise in June, mainly reflecting higher rice prices. Moreover, the Muslim fasting month (Ramadan) began on 1 August and will likely see a seasonal spike in prices for items such as foodstuffs and clothing in the August CPI reading. Despite the monthly price increase, annual inflation continued to decelerate and fell from 5.5% in June to 4.6% in July. The reading marked the lowest level in 14 months and was below market expectations of 4.8%. The headline figure continues to benefit from a favorable base effect associated with last year's surge in food prices. Annual average inflation fell for the first time since May 2010, edging down to 6.2% in July. As inflation remains contained, the Central Bank left the benchmark interest rate unchanged at 6.75% for a seventh straight month at its meeting held on 9 August. The Central Bank set an inflation target of 5.0% 1% for this year and 4.5% 1% for 2012.


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