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Inflation cools down in August

Jakarta Globe - September 1, 2022

Jakarta – Inflation in Indonesia has cooled down for the first time in seven months, as food items, transportation, and telecommunication prices dropped, the Central Statistics Agency, or BPS, announced on Thursday.

The consumer price index, a broad basket of consumer goods and services prices, only rose by 4.63 percent in August from the same period last year, the agency said. That compared to a 4.94 percent increase in July.

Core inflation, which excluded volatile food items and administered prices, continues its acceleration to 3.04 percent compared to 2.86 percent a month ago. The inflation has accelerated to 3.63 percent in the first eight months this year, compared to 0.84 percent in the same period last year.

The country saw its first deflation in six months on a monthly basis, with the consumer price index falling 0.21 percent in August from July.

"In August 2022, there was a deflation of 0.21 percent. Let's look at the main commodities contributing to deflation in August 2022. They come from shallots, red chilies, cayenne pepper, cooking oil, and purebred chicken," Margo Yuwono, the BPS head, said at a press conference.

Slowing inflation could give some consideration to Bank Indonesia, the country's central bank, when it meets to decide its next policy move on Sep 22.

Last month, Bank Indonesia raised its benchmark interest rate to 3.75 percent. It was the first benchmark rate increase since October 2018 as the central bank anticipated the government's decision to raise the subsidized fuel prices.

Bank Indonesia governor Perry Warjiyo said Wednesday that the central bank expects inflation could reach 5.0 percent this year, one percentage point above its target.

"Overall, we estimate that inflation this year will most likely be higher than 4.0 percent, the upper threshold of our target. It could approach around 5 percent by the end of this year," Perry said in a meeting Wednesday with the House of Representatives' Commission XI, which oversees finance and banking.

Source: https://jakartaglobe.id/business/inflation-cools-down-in-augus