- Indonesia’s inflation further slowed down to 2.51% YoY in May (-0.08% MoM), with foodstuffs deflation led by chicken and shallots. However, food inflation remains a risk going forward with rice being the primary risk.
- While import prices are pulling core inflation upward, weaker consumer demand may be pulling things in the opposite direction.
- Low inflation and weak consumption dissuade BI against hiking rates, but possibility of 25 bps hike remains in the event of extreme pressure on Rupiah.
