Indonesia’s consumer price index rose 4.33% annually in April, government data showed on Tuesday, slowing from the previous month and reinforcing expectations for the central bank to leave interest rates unchanged in the coming months.
Annual inflation was lower than the 4.97% pace recorded in March and slightly below the 4.39% predicted in a Reuters poll. On a monthly basis, the consumer price index rose 0.33%, compared to a 0.37% forecast and a 0.18% increase a month earlier.
Indonesia’s central bank at its April meeting kept its benchmark interest rates unchanged for a third straight month, predicting headline inflation would be back within its target of 2% to 4% before September.
“Concerns over inflation appear to be rapidly receding, guided by strong efforts by the government to manage food supply and by private sector agility,” said Bank Danamon economist Irman Faiz.
“Under the current performance of Indonesia’s internal and external balances, we believe that Bank Indonesia will leave its policy rate at 5.75% for the time being,” he added.
Core inflation, which excludes government-controlled prices and volatile food prices, eased to 2.83%, below a 2.89% prediction in the poll and compared to 2.94% in March.
Higher transportation fares and prices of fuel and some food commodities around the Islamic holy month of Ramadan contributed to April’s inflation, Statistics Indonesia chief Margo Yuwono said, although the increase was more benign than in similar periods in previous years.
Indonesian Muslims typically spend more and millions travel home during Eid al-Fitr, which marks the end of Ramadan and fell in late April this year.
Lower chilli prices in harvest season capped the CPI increase.
Bank Permata economist Josua Pardede also expected the central bank to hold rates for the rest of the year and headline inflation of around 3.5% by year-end, but warned that authorities should watch for potential impact of dry weather on food supply this year.
Indonesia’s weather agency predicted Indonesia will this year face its driest weather since 2019.
