Indonesia: Inflation increases in June
Latest reading: Inflation ticked up to 1.9% in June, above May’s 1.6% but within Bank Indonesia (BI)’s target range of 1.5%–3.5%. The rise was due to a stronger increase in prices for food and beverages plus housing, water, electricity and household fuels compared to the prior month.
Meanwhile, annual average inflation fell to 1.5% in June (May: 1.6%). Core inflation was unchanged, coming in at May’s 2.4% in June.
Lastly, consumer prices increased 0.19% from the previous month in June, contrasting the 0.37% fall logged in May.
Outlook: Our panelists expect inflation to increase throughout the rest of 2025 on soft private spending growth, a weaker rupiah and ongoing interest rate cuts by BI aimed at supporting economic activity in response to global uncertainty. Still, inflation will average below 2024’s rate and within BI’s target in 2025 as a whole as domestic demand loses steam.
Panelist insight: Nomura’s Euben Paracuelles and Nabila Amani stated:
“Taking into account the June outturn, we maintain our average headline inflation forecast at 1.6% for 2025, easing from 2.3% in 2024. Our inflation forecast nonetheless pencils in a trajectory in which headline inflation rises to 2.1% in H2 from 1.2% in H1, as administered prices (e.g., electricity tariffs) are likely to remain unchanged throughout the year, while food and transportation prices are set to rise amid year-end festivities. […] We think consumption will remain soft, driven by fundamental factors, such as labor market weakness and pandemic scarring effects, and this would likely keep inflation relatively benign.”