Economic Highlights:
Inflation Continues to Moderate in May
Inflation Continues to Moderate in May
¨ The headline inflation
moderated to 3.3% y-o-y in May (+3.6% in
April). The more moderate increase in prices of volatile food products, housing
& utilities, and education was partly offset by a pick-up in prices of the
processed foods and cost of clothing.
¨ Monthly inflation, however, recorded an
increase of 0.2%, a rebound from a deflation in the previous month.
¨ Moving forward, we expect inflation to
moderate to an average of 5.0% in 2016, from +6.4% in 2015, on account of
low crude oil prices and relatively soft economic growth.
¨ As inflation will likely be manageable, it
will provide room for Bank Indonesia to cut its benchmark rate. Nevertheless,
we are of the view that the BI will be cautious, as it also needs to be mindful
of external financial market volatilities and its impact on the rupiah.
Furthermore, as the BI will soon replace its policy rate with the 7-Day
(Reverse) Repo rate in August, which currently stands at 5.5%, we foresee the
BI to maintain the BI rate at 6.75% during the transition period.
Kindly click the following link for the full report: Inflation Continues to Moderate in May
Best regards,
Rizki Fajar
Vice President
Economist
PT. RHB Securities
Indonesia
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