Indonesia's June Inflation Eases to Lowest in 14 Months

INFLATION - JAKARTA. Indonesia's annual inflation rate in June eased to 3.52%, settling into the central bank's target range for a second straight month, data from the statistics bureau showed on Monday.

Headline inflation dropped to its lowest since April 2022 and came in below the 3.64% expected in a Reuters poll and below the 4.00% seen in May.

Inflation in Southeast Asia's largest economy has gradually eased since peaking last September at 6%, as BI hiked interest rates by a total of 225 basis points between August and January to control prices.

The headline rate reached the upper end of Bank Indonesia's (BI) 2% to 4% target range earlier than expected in May and sparked speculation that BI might soon start easing policy rates.

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Transportation fares, food prices and rents rose in June, Pudji Ismartini, deputy head of Statistics Indonesia, said in a press conference. Meanwhile, prices of telecommunications and some financial services eased.

The core inflation rate, which strips out government-controlled and volatile food prices, eased to 2.58% in June from 2.66% a month before. The poll had expected 2.64% core inflation.

"We expect BI to start becoming more dovish although they continue on the stability stance for monetary policy this year," said Trimegah Securities economist Fakhrul Fulvian, who expected the central bank to start easing the policy rate in August or September.

BI at its June policy meeting left its key interest rates unchanged for a fifth consecutive meeting and said it would focus on keeping the rupiah exchange rate stable amid global uncertainties.

Fakhrul added BI has room for a 50 bps rate this year. Meanwhile, Radhika Rao of DBS forecast a rate cut late in the third quarter.