VIEW: Goldman Sachs Expects First Rate Cut In Q4 But Depends On USD

Indonesian June CPI inflation came in below expectations with headline down 0.3pp to 2.5% y/y, lowest since September 2023, and core steady at 1.9%. Both are well within Bank Indonesia’s (BI) 1.5-3.5% target band with underlying inflation at the low end. Goldman Sachs continues to forecast the first BI policy rate cut in Q4 “assuming dollar pressures ease and food inflation subsides”.

• Goldman Sachs said that “today's reading was below our and Bloomberg consensus expectations … mainly driven by lower food prices.”
• “On a seasonally adjusted sequential basis, headline CPI fell 0.2% mom s.a. in June after being flat in the previous month.”
• “Food inflation slowed to 5.0% yoy in June (vs. 6.2% yoy in May) due to lower shallot, tomato, and poultry prices with a partial offset from higher chili prices. This contributed 1.4pp towards headline inflation in June, compared to 1.7pp the previous month.”