Indonesia: Inflation falls to lowest level since February in May
Inflation fell to 2.8% in May, down from April’s 3.0%. May’s reading marked the lowest inflation rate since February. Looking at the details of the release, price pressures for food declined sharply in May, while prices for transport, and housing, water, electricity and household fuels were largely in line with the previous month’s reading.
Accordingly, annual average inflation edged down to 2.9% in May (April: 3.0%). Meanwhile, core inflation rose to 1.9% in May, from April’s 1.8%.
Lastly, consumer prices dropped 0.03% over the previous month in May, swinging from April’s 0.25% increase. May’s result marked the weakest reading since October 2022.
United Overseas Bank analysts Enrico Tanuwidjaja and Agus Santoso commented on the outlook:
“The reason that drive 2024 inflation lower than the last year is the moderation in fuel prices that drives the normalisation of administered price inflation. Meanwhile, we believe the risk of higher food prices will dissipate in the second quarter of this year as production improves, especially for rice and the normalisation of El Nino’s impact on food commodities. As such, we also keep our forecast for BI to be on hold for the rest of the year before cutting its interest rate in 1Q25.”