Indonesia’s inflation rate hits three-month high of 3.34% in June

[JAKARTA] Indonesia’s annual inflation rate accelerated to a three-month high of 3.34 per cent in June from 3.08 per cent the previous month, data showed on Wednesday (Jul 1), higher than the median forecast in a Reuters poll and moving closer to the top end of the central bank’s target range.

The poll had expected a June annual rate of 3.2 per cent. Bank Indonesia (BI) targets inflation within a range of 1.5 to 3.5 per cent.

Increases in non-subsidised fuel prices affected transportation costs and higher logistic costs affected prices of some food items, while a weaker rupiah also pushed up costs.

The core inflation rate, which strips out government-controlled prices and volatile food prices, was 2.76 per cent in June, compared to 2.59 per cent a month earlier. Economists had forecast a 2.61 per cent rate.

BI raised its policy rates twice in June, including a surprise off-cycle rate hike, in a bid to arrest the drop in the rupiah and manage inflation. The central bank has hiked its policy rates by a total of 100 basis points since mid-May.

The rupiah fell to a historic low against the US dollar in early June before regaining some ground after BI’s surprise rate hike and an improvement in global market sentiment driven by an interim peace deal between the US and Iran.

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BI has said inflationary pressures could heighten further, due to increases in some fuel prices and the threats to food production posed by the El Nino weather pattern, but it expects inflation to stay within its target range.

The statistics bureau will release May trade data later on Wednesday. REUTERS