Indonesia Feb. consumer prices rise 0.68% m/m; est. +0.30%

Indonesia Feb. consumer prices rise 0.68% m/m; est. +0.30%

Indonesia’s February Consumer Prices Rise 0.68% Monthly, Driven by Food Inflation

Indonesia’s consumer prices rose 0.68% month-on-month (m/m) in February 2024, surpassing the estimated 0.30% increase, according to official data. This acceleration was primarily fueled by surging food prices, including rice, chicken, chili, and sugar, which saw annual retail rice price increases of 19.28% compared to February 2023. The year-on-year (y-o-y) headline inflation rate reached 2.75%, above market forecasts of 2.60% and up from January’s 2.57%.

The spike in food inflation reflects supply-side challenges, including reduced harvests linked to the El Niño weather phenomenon, which limited rainfall in late 2023. Bank Indonesia (BI) acknowledged that rising food prices are temporary, attributing them to seasonal factors, and reiterated its target of keeping annual inflation within 1.5%–3.5%.

Core inflation, which excludes volatile food and energy prices, remained stable at 1.68% y-o-y in February, unchanged from January and below the 1.71% market expectation. This low reading, a level typically observed during economic crises, has raised questions about weak household consumption or external deflationary pressures, such as China’s export-driven price competition.

BI Governor Perry Warjiyo emphasized that the central bank will maintain its current interest rate of 5.50% until the second half of 2024, prioritizing inflation control and rupiah stability. While headline inflation remains within the target range, core inflation’s stagnation suggests underlying deflationary risks. Analysts anticipate inflationary pressures may intensify during Ramadan, with annual inflation potentially peaking at 2.9% in April before easing to 2.8% by year-end.

The central bank continues to monitor supply chain dynamics, global trade trends, and domestic demand to balance inflation management with economic growth. For now, policymakers remain cautious, prioritizing price stability ahead of potential rate cuts later in 2024.

Indonesia-Investments: Indonesia-Investments
Reuters: Reuters
CNBC, Bank Indonesia: CNBC, Bank Indonesia