April 24, 2024 00:40 GMT
BI Inflation Outlook Unlikely To Change In April
INDONESIA
Bank Indonesia (BI) meets today and while consensus expects no change in rates over a quarter of analysts surveyed by Bloomberg expect at 25bp hike due to recent currency weakness. Apart from the rupiah, there has been some attention on inflation developments in March, but we believe that BI will look through the tick up in headline and its inflation assessment will be unchanged. See our BI Preview here.
- Headline inflation rose to 3.0% y/y in March from 2.8% due to the volatile food component which rose 10.3% y/y and was likely due to Ramadan-related demand. BI said in March that food inflation should ease with the “onset of the harvesting season”.
- Core inflation was steady at 1.7% y/y, well below the mid-point of the 2.5%±1% band which is important given the central bank’s focus on underlying price pressures. It stated in March that it is “confident that headline inflation in 2024 will remain under control” and within the target, we don’t expect this sentiment to change this month.
Indonesia CPI y/y%
Source: MNI - Market News/Refinitiv
- With the rupiah weakening over the year though, BI will continue to monitor imported inflation, which remained negative in February. The S&P Global manufacturing PMI reported that the weak currency added to cost pressures March, which BI is likely to watch closely.
Indonesia imported inflation vs IDR NEER
Source: MNI - Market News/Refinitiv
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