VIEW: JP Morgan Sees Two Rate Cuts In H2 2024

Indonesia’s CPI inflation for December came in below expectations and well within Bank Indonesia’s target band at 2.6% for headline and 1.8% for core. But JP Morgan notes that the 3-month saar headline rate rose to 3.4% last month from 1.2% in September. It expects two 25bp rate cuts in H2 2024 driven by a weaker US dollar and “benign inflation”.

• “Food remains the key contributor to monthly price gains, adding 0.27%pts to the 0.41%m/m, nsa rise in overall CPI and continues to display a pick-up in underlying momentum. Recent food inflation has been driven by volatile items (e.g., chillies, onions, shallots) that typically do not show persistence.”
• “We continue to expect headline CPI to average 2.4%oya this year, at the mid-point of the 2024 inflation target range of 1.5-3.5%oya. This is premised on direct and indirect fiscal support to ensure price stability, in addition to the already impressive set of supply-side measures implemented over the past several years.”