Indonesia inflation moderates further; rate cut this month on the cards

Indonesia's headline inflation moderated for the third straight month, led by further easing in food inflation, while core inflation also edged down.

The combination of benign price pressures, weak growth and easing downward pressure on the IDR suggests a rate cut by Bank Indonesia this month is on the cards said ANZ Research in a report on Tuesday.

On a sequential basis, headline CPI rose 0.07 per cent month-on-month in May. Transport prices led the rise (0.87 per cent), followed by health costs (0.27 per cent). Most other major components recorded small increases. The key exception was the food, beverages and tobacco component, which fell 0.32 per cent.

"As things stand, the recent recovery in the IDR and lower volatility should pave the way for the central bank to shift its focus back to supporting the economy. A rate cut later this month looks more likely than not," stated the report.

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