Indonesian Inflation Slows

By Stefanno Sulaiman and Fransiska Nangoy

JAKARTA (Reuters) – Indonesian prices rose at their slowest rate in almost three years in September as food-price inflation eased, giving the central bank room to loosen monetary policy to stimulate economic growth.

Annual inflation reached 1.84%, according to Statistics Indonesia on Tuesday. This is the lowest rate since November 2021, as reported by LSEG data.

This figure is down from 2.12% in August and lower than the 2.00% median of analyst estimates in a Reuters poll. It also remains within Bank Indonesia’s inflation target range of 1.5% to 3.5%.

Food prices are the biggest contributor to inflation figures, but their growth rate eased to 2.57% compared to August’s 3.39%.

Core inflation, excluding volatile food prices and government-controlled prices, was 2.09%, up from 2.03% in the poll.

An abundant supply of food and the government’s policy to maintain price stability for strategic commodities allow for more flexibility for Bank Indonesia (BI) to loosen its monetary stance, said Myrdal Gunarto, an economist at Maybank Indonesia.

BI is expected to cut its policy interest rate to 5.25% by year-end, a revision from an earlier forecast of 5.75%.

Last month, BI reduced the rate for the first time in over three years to support growth amid slow inflation—by 25 basis points to 6.00%—just hours before a 50 basis point cut in the U.S.