Key insights
- Indonesia's inflation is projected to rise in May due to increased fuel, airfare, and cooking oil prices, nearing the central bank's target range. This, coupled with a declining trade surplus, suggests potential inflationary pressures. While the government's fuel subsidies offer some protection, the overall trend could signal broader regional economic tightening, indirectly impacting global markets through commodity prices and currency movements.
Investing.com -- Indonesia’s annual inflation rate likely accelerated to 2.97% in May, according to a Reuters poll released on Friday, moving closer to the upper end of the central bank’s target range as prices increased for non-subsidised fuel, airfares and cooking oil.
The poll surveyed 14 respondents for headline inflation projections. The median forecast for May’s annual core inflation rate stood at 2.52%, up from 2.44% recorded in April, based on responses from 12 economists.
Bank Indonesia maintains an inflation target range of 1.5% to 3.5% for 2026 and 2027.
The same survey showed 11 economists expected Indonesia’s trade surplus to decline to $1.50 billion in April, down from the $3.32 billion surplus recorded in March. Exports in April were forecast to rise 8.8% year-on-year, while imports were predicted to increase 3.25% year-on-year.
Earlier this month, Bank Indonesia raised policy rates by 50 basis points to support the weakening rupiah currency and maintain inflation within its target range through next year.
The Indonesian government has expanded its fuel subsidy budget following the Iran war, protecting most consumers from inflationary pressures stemming from global crude oil price volatility.
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