Indonesia’s inflation inches up in May, stays within central bank target By Reuters

By Stefanno Sulaiman and Gayatri Suroyo

JAKARTA (Reuters) – Indonesia’s inflation rate accelerated slightly in May due to rising food prices and airfares, official data showed on Thursday, roughly in line with market expectations and within the central bank’s target range.

The consumer price index rose 3.55% on an annual basis in May, compared with 3.60% expected in a Reuters poll and April’s rate of 3.47%.

The May inflation rate was the highest since December 2017, but it remained within Bank Indonesia’s 2022 target range of 2% to 4%.

The annual core inflation rate barely changed in May from a month earlier, at 2.58% versus April’s 2.60%. The poll had expected a rate of 2.70%.

Margo Yuwono, the head of Statistics Indonesia, said a three-week ban on palm oil exports in May had brought down cooking oil prices, but he stressed that global food inflation continued to affect local prices.

“The rise in strategic commodity prices in global markets, like wheat flour, soy, has contributed significantly to domestic inflation,” he said, noting that chicken and eggs prices have also risen due to high costs of imported chicken feed.

The government last month obtained parliamentary approval to top up energy subsidies by $ 24 billion to be able to keep some energy prices unchanged. Economists said the move had reduced inflationary pressures being felt from high global oil prices.

However, some economists said inflation will continue to creep up in Southeast Asia’s largest economy.

“Going ahead, inflation pressures that we have seen in other countries will be more apparent,” said Fakhrul Fulvian, an economist with brokerage Trimegah Sekuritas.

The central bank last month announced more hikes in the reserve requirement ratio for banks, expecting 2022 inflation to rise to slightly above 4%, before retreating to within its target range in 2023.