Indonesia Inflation Should Remain Stable Through 2H

Dow Jones
Aug 03

0817 GMT - Indonesia's headline inflation is expected to remain broadly stable through 2H, RHB economist Wong Xian Yong says in a note. Food prices are likely to remain the main source of volatility as El Nino conditions strengthen, while sustained rupiah weakness could gradually feed into imported inflation, he says. However, subdued domestic demand and well-anchored inflation expectations should help limit broader price pressures, he reckons. RHB expects Bank Indonesia to keep its benchmark interest rate unchanged at its August meeting, extending its policy pause after raising rates by a cumulative 100 bps since May. Wong continues to expect one additional 25bps rate hike in 3Q, primarily to support the rupiah and contain imported inflation rather than respond to broad-based domestic price pressures.

 

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