Headline inflation eases in Indonesia on slower rise in food prices

JAKARTA - Indonesia's headline inflation eased to 3.39% y/y in September, following two straight months of acceleration. A pullback in volatile food inflation more than offset a pick-up in administered prices and core inflation.

ANZ Bank says that, with inflation contained and Bank Indonesia (BI) keen to support growth, further monetary policy easing looks likely.

"We have pencilled in another 25bp rate cut in Q4 2019," ANZ said in a research note.

On a sequential basis, Indonesia's headline CPI fell by 0.27% m/m in September, the first decline in seven months. The decline was led by food prices, which fell 1.97%.

Most other major categories -- such as housing, clothing, healthcare and education -- saw prices rise further, but at a slower pace compared to the previous month.

Core CPI, which excludes volatile food and government-controlled prices , rose by 0.29% m/m in September, slower than the 0.43% gain seen in August. In y/y terms, core inflation edged up to 3.32%, the highest since February 2017.

The ANZ note says the bottom line is that both headline and core inflation are likely to stay comfortably within the central bank's 2.5-4.5% target band, and will not prevent BI from easing monetary policy.

"We continue to see scope for at least one more 25bp cut in BI's easing cycle, which will take its policy rate to 5.00% by end-2019."  www.live.anz.com (ATI).