In September 2024, Indonesia’s headline inflation eased to 1,84% (yoy) from 2,12% in August 2024, marking the lowest level since December 2021, mainly driven by a decline in volatile food prices. Core inflation edged up to 2,09% (yoy), driven by higher prices of ground coffee and education. In addition, the Fed began its monetary easing cycle by cutting its policy rate by 50bps last month, almost in line with BI cutting its policy rate by 25bps. Recent developments show that the Rupiah is stable at around Rp15.660/USD, despite depreciating amid capital outflows influenced by geopolitical tensions and uncertainty surrounding the US election. Although foreign exchange reserves fell to USD149,9 billion, Bank Indonesia is expected to maintain the BI rate at 6,00% at its October meeting. Any potential room for further policy cuts should be reserved to address the risk of a prolonged deflationary trend.
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