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Updated January 2nd, 2024 at 12:29 IST

Indonesia's December inflation eases more than expected

To combat inflation and maintain currency stability, Bank Indonesia increased interest rates by 250 basis points.

Business Desk
Indonesian Rupiah
Indonesian Rupiah | Image: X Photo
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Indonesia witnessed a more significant drop in its annual inflation rate than anticipated in December, reaching 2.61 per cent, aligning with the central bank's target range. This figure marked a decline from November's 2.86 per cent and was below the 2.72 per cent forecasted in a poll.

The central bank has set an inflation target of 2 per cent to 4 per cent for 2023 and aims for 1.5 per cent to 3.5 per cent in 2024. Furthermore, core inflation, excluding government-controlled and volatile food prices, also decreased beyond expectations to 1.80 per cent, the lowest since December 2021, compared to the 1.85 per cent predicted in the poll.

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To combat inflation and maintain currency stability, Bank Indonesia increased interest rates by 250 basis points from August 2022 to October 2023. Economists like Radhika Rao from DBS Bank noted that this lower-than-expected inflation in December would likely ease pressure on policymakers, delaying any immediate need for an easing cycle in the first half of 2024.

However, Rao cautioned that headline inflation might surge above 3 per cent in the initial half of 2024, especially during religious holidays like Ramadan, expected to commence in March. Bank Indonesia officials had already foreseen the possibility of reaching a 3.2 per cent inflation rate due to increased global food and energy prices this year.

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(with Reuters inputs)

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Published January 2nd, 2024 at 12:29 IST

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