Upward trend: People shopping for items in Surabaya. While global gold prices and firm domestic demand may continue to exert inflationary pressure, the overall inflation rate remains within Bank Indonesia’s target range of 1.5% to 3.5%. — AFP
JAKARTA: Indonesia’s inflation surged in September, driven by gold jewellery prices, which posted their steepest increase in five months.
The country’s consumer price index (CPI) rose 2.65% year-on-year (y-o-y) last month, up from 2.31% in August, while monthly inflation stood at 0.21%, Statistics Indonesia (BPS) data showed.
“Gold jewellery inflation remained the single biggest contributor to inflation, extending its streak as an upward driver for the 25th consecutive month since September 2023,” BPS production undersecretary M. Habibullah said at a press conference.
Staple food prices also added to the headline rise, led by red chili peppers, broiler chicken and green chilis.
By contrast, shallots, tomatoes, garlic, bird’s eye chilis, cucumbers and secondary school fees all recorded declines, tempering the overall increase.
Rice, traditionally a major driver of inflation, provided relief in September.
Prices fell for the second time this year after a decline in April, breaking from seasonal trends in which September had consistently recorded rice inflation between 2021 and 2024.
“The deflation in rice helped offset stronger price gains from other food items,” Habibullah said.
By components, core inflation eased to 2.19% y-o-y in September, driven mainly by gold, cooking oil and coffee, while other categories remained muted.
Volatile food inflation surged 6.44% y-o-y, the steepest increase in more than a year, on higher red chilis, chicken and green chili prices.
Administered prices, meanwhile, rose just 1.10% y-o-y, restrained by stable petrol and electricity tariffs.
While global gold prices and firm domestic demand may continue to exert inflationary pressure, the overall inflation rate remains within Bank Indonesia’s (BI) target range of 1.5% to 3.5%.
“The government’s eight-plus-four stimulus package, worth 24 trillion rupiah (US$1.44bil), also includes monthly food assistance of 10kg of rice and two liters of cooking oil from October to November, cushioning purchasing power and suppressing volatile food inflation at the consumer level,” Hosianna Evalita Situmorang, an economist at private lender Bank Danamon, said in a statement .
The central bank cut its benchmark interest rate in September by 25 basis points (bps) to 4.75%, marking the third consecutive reduction and the lowest level since October 2022.
BI governor Perry Warjiyo said the September cut was consistent with inflation expectations, rupiah stability and efforts to encourage growth in line with the economy’s capacity, while also considering the United States Federal Reserve’s (Fed) expected move to cut its benchmark federal funds rate.
He attributed the low administered-price inflation to government measures to reduce fuel prices and airfares, and the decline in core inflation to subdued imported inflation as well as BI’s efforts to anchor expectations.
The Fed is widely anticipated to cut rates by a quarter point by year-end amid concerns over a weakening US labour market and in a bid to encourage hiring by lowering borrowing costs.
David Sumual, chief economist at private lender BCA said BI is expected to hold its policy rate in October. — The Jakarta Post/ANN
