Indonesia's Headline Inflation Eases in August, Core Prices Rise

INFLATION - JAKARTA. A drop in some food prices saw Indonesia's inflation ease more than expected in August, even though the rate was above the central bank's target range and core consumer prices rose, statistics bureau data showed on Thursday.

The headline annual inflation rate cooled to 4.69% in August from 4.94% a month prior. A Reuters poll had expected an August rate of 4.90%.

The annual core inflation rate, which excludes government-controlled prices and volatile food prices, accelerated to 3.04% in August, roughly in line with the 3% forecast in the poll, from 2.86% in July.

Bank Indonesia (BI) targets inflation within 2% to 4% for 2022 and 2023, but its governor, Perry Warjiyo, has said inflation would likely exceed that range this and next year.

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Adding to the risk of inflation picking up is the government's potential fuel price hike. President Joko Widodo has said he is considering raising prices to reduce the burden of energy subsidies amid high global energy prices and a depreciating rupiah.

The head of Statistics Indonesia, Margo Yuwono, said a fuel price hike could substantially increase price pressure as it would affect prices of other goods and services too.

BI raised its benchmark policy rate last month for the first time since 2018, in a move some economists believe was taken in anticipation of a fuel price hike.

Lawmakers told Reuters the government was considering a 30% to 40% increase in subsidised fuel prices. Authorities have not given a time frame for when a such a price hike would happen.

 

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