Indonesian inflation is easing after surprise rate hike shores up the rupiah

Indonesia's central bank recently implemented a surprise rate hike to support the rupiah. Our proprietary weekly inflation nowcast is suggesting that this move is having the desired impact of reducing price growth, as well.

CEIC's machine-learning nowcasting model suggests that inflation is in a range between 2.65% and 2.75% for the month of May – down from 3% in March and April – approaching the midpoint of Bank Indonesia's target range (2.5%, plus or minus 1 percentage point).

If you are a CEIC user, access the story here.

The currency is a key concern for Bank Indonesia as a weak rupiah (IDR) has the effect of importing inflation, especially in consumers' shopping baskets. Central bankers will have welcomed the mild strengthening of the rupiah, reflected in CEIC's daily trade-weighted exchange rate calculation (NEER) since April 26, the day of the rate hike. CEIC's food index shows a further flattening in price growth since the end of the Eid-al-Fitr festival, which has an important seasonal effect each year.

If you are a CEIC user, access the story here.

CEIC's nowcast evaluates the trajectory of Indonesian inflation weekly, based on a range of high-frequency and alternative data. The model identifies various underlying factors influencing inflation; our final chart shows the shifting contributions from various drivers of inflation dynamics.

Indonesia's May CPI figures are scheduled for release in the first week of June.

If you are a CEIC user, access the story here.