Indonesia's National Statistics Agency announced on October 1 that the country's annual inflation rate edged up slightly to 3.28% in September from 3.19% the previous month, roughly in line with economists' forecast of 3.3%, and remained within Bank Indonesia's target range of 1.5% to 3.5%. The main factors driving price pressures in September were higher fuel prices and food prices, including fish, chicken, chili, and rice. Meanwhile, core inflation, which excludes government-controlled prices and volatile food prices, eased slightly to 2.84% in September from 2.92% in August, and came in below analysts' forecast of 2.91%. Bank Indonesia raised its policy interest rate by a total of 1.00% during May and June to support the weakened rupiah, curb imported inflation, and keep inflation within its target range through 2027. The government's energy price subsidy measures helped limit price pressures to a relatively mild level, even as global crude oil prices remained elevated.
Inflation within BI target and core easing reduces pressure on Bank Indonesia to hike further, while BI's prior hikes were aimed at supporting the rupiah; softer inflation outlook is less supportive for IDR.
