Higher inflation in July. The headline inflation picked up to 2.4% y-o-y in July from 1.9% in June, matching our estimate but slightly above consensus’ 2.3% due to higher food prices (Exhibit 1). On a monthly basis, prices increased by 0.3% m-o-m, up from 0.2% in June. By contrast, core inflation edged down to 2.3% y-o-y in July from 2.4% in June, against expectations of it remaining unchanged.<\/p>\n\n\n\n
Food inflation rose sharply. F&B and tobacco inflation rose sharply to 3.8% y-o-y from 2% in June, with monthly inflation of 1% m-o-m, up from 0.5% in June (Exhibit 2). As expected, Rice and red onion reported inflation of 1.6% and 10% m-o-m, respectively up from 1.1% and 5.7% in June. By contrast, garlic and cooking oil prices dropped slightly providing some offset (Exhibit 3). As expected, transport reported monthly inflation of 0.2% m-o-m, up from 0.1, implying 0.1% y-o-y, unchanged from June, reflecting higher non-subsidized fuel prices (Exhibit 4).<\/p>\n\n\n\n
Lower core inflation. Core inflation stood at 0.1% m-o-m, unchanged from June, implying 2.3% y-o-y, down from 2.4%. The decline in core inflation was broad-based led by personal care and other services which fell to 9% y-o-y from 9.3%. Household equipment and F&B provision eased to 0.5% and 1.9% y-o-y, respectively, from 0.6% and 2% in June. By contrast, education inflation rose 2% y-o-y from 1.8%, reflecting new academic fees.<\/p>\n\n\n\n
We maintain the lower inflation forecast for 2025. We maintain our average headline inflation forecast at 1.8% for 2025 which reflects a sharp drop from 2.3% in 2024. In terms of trajectory, we expect inflation to continue rising until September, approaching 3%, mainly reflecting the low base effect from the sharp drop in food prices last year as the El Nino effect faded. This implies an average of 2.5% in 2H, up from 1.2% in 1H, partly due to base effects from lower food prices.<\/p>\n\n\n\n
Policy implications. We maintain our 2025 BI Rate forecast at 5.00%, implying another 25bps in rate cuts from the current 5.25%. The July inflation outturn suggests a lower BI Rate of 2.9% from 3.6% in Jun (Exhibit 5), but still well above the long-term average of 1.6%, suggesting still-restrictive monetary stance. In terms of timing, with a weaker Rupiah due to a stronger dollar following the Fed s hawkish stance in July, we believe BI will maintain its cautious approach, increasing the likelihood of a pause at the August meeting. However, we continue to believe that growth remains the dominant consideration in BI s policy framework, as it is still assessed to be below potential, consistent with benign core inflation.<\/p>","protected":false},"excerpt":{"rendered":"
Higher inflation in July. The headline inflation picked up to 2.4% y-o-y in July from 1.9% in June, matching our […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[7],"tags":[],"class_list":["post-5669","post","type-post","status-publish","format-standard","hentry","category-market-research"],"_links":{"self":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/5669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/comments?post=5669"}],"version-history":[{"count":1,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/5669\/revisions"}],"predecessor-version":[{"id":5670,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/5669\/revisions\/5670"}],"wp:attachment":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/media?parent=5669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/categories?post=5669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/tags?post=5669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}