Economic Highlights:
Inflation Eases Back in July
Inflation Eases Back in July
¨ The headline
inflation decreased to 3.2% y-o-y in July,
down from +3.5% in June. The slower increase in prices of raw food products and
a larger deflation in transport contributed to the decrease but were partly
offset by an acceleration in the costs of housing & utilities, clothing,
and education.
¨ M-o-m inflation recorded an
increase of 0.7%, stabilising from the previous month.
¨ Moving forward, we expect inflation
to moderate to an average of 4.0% in 2016, from our previous forecast of
+5.0% and +6.4% in 2015, on account of low crude oil prices and relatively soft
economic growth.
¨ As the inflation will likely
continue to be benign after Ied-Fitr and school holiday and given that BI
mentioned there is still a need for additional easing to stimulate growth, we
expect another 25 bps cut to 7-Day (Reverse) Repo rate in 2H 2016. This may
come in the early part of the 2H, if the economic growth in 2Q remains soft.
Best regards,
Rizki Fajar
Vice President
Economist
PT. RHB Securities
Indonesia
