Indonesia’s consumer prices pick up in June, stay below the target range

Consumer prices in Indonesia picked up pace in June, rising more than expected as price pressures intensified close to the end of the Muslim fasting month of Ramadan. However, it remained well below the Bank Indonesia’s targeted range of inflation.

The annual rate of inflation in June rose 3.45 percent, compared to 3.33 percent in May, and the median forecast in a Reuters poll of 3.38 percent, data released by the National Statistics Bureau showed Friday. Further, Core inflation rate, which strips out administered and volatile food prices, was an annualized 3.49 percent in June, near the 3.50 percent analysts had expected. On a monthly basis, the consumer price index (CPI) rose 0.66 percent.

Despite the acceleration, June's rate is still inside Bank Indonesia's (BI) target range of 3-5 percent. Before Friday's data, the central bank said the rate may be below 4 percent at the end of the year, creating room for the central bank to ease monetary policy again. BI's current benchmark rate, cut four times this year by a total of 1 percentage point, is 6.50 percent. It will adopt a new benchmark in August, Reuters reported.

The national lender aims to extend support to the government to help boost the country’s gross domestic product to 5.4 percent, currently at 5 percent, compared with last year’s 4.79 percent.

Meanwhile, the central bank of Indonesia has much room for easing this year, as the possibility of US Federal reserve to raise rate in coming months is less after the United Kingdom voters voted in a referendum to stay out of the European Union.