Indonesia’s core inflation hits three-year high on surging demand

JAKARTA, Sept 3 (Bloomberg): Indonesia’s core inflation accelerated to a near three-year high in August, affirming the central bank’s warnings that second-round price pressures are spreading across the economy.

Core inflation, which strips out the impact of volatile food prices and government-subsidized items like electricity and fuel, hit 3.04% last month, its highest since November 2019, according to data compiled by Bloomberg.

"Core inflation continues in a rising trend, reflecting stronger domestic demand and purchasing power as it covers more than 700 commodities,” Margo Yuwono, head of the statistics office, said at a briefing on Thursday.

Headline inflation eased to 4.69% in August from 4.94% in July amid slowing price increases of food and beverage and transport. The government is closely watching the rising costs of rice and eggs, though, as they have a large contribution to food inflation.

Bank Indonesia delivered a surprise interest-rate hike last month, saying both core and headline inflation are set to breach its 2%-4% target this year.

Economists warned that both gauges could go even higher, should the government decide to raise prices of subsidized fuels. - Bloomberg