![Indonesia's February inflation rate outpaces expectations on rising rice and chili prices](https://i-invdn-com.investing.com/trkd-images/LYNXNPEK20131_L.jpg)
![Indonesia's February inflation rate outpaces expectations on rising rice and chili prices](https://i-invdn-com.investing.com/trkd-images/LYNXNPEK20131_L.jpg)
©Reuters. File photo: Vendors serving customers at a traditional market in Jakarta, Indonesia, January 2, 2023.Reuters/Agen Dinar Urfiana/File photo
Written by Stefano Sulaiman and Francisca Nangoy
JAKARTA (Reuters) – Indonesia's inflation rate was higher than expected in February due to soaring food prices, government data showed on Friday, but remained within the central bank's target range and any interest rate cuts would only be made in the second half of 2024. The market view that it will be implemented has strengthened.
The monthly inflation rate accelerated to 2.75% from January's 2.57%, the statistics agency said. The median forecast of economists polled by Reuters was for inflation to be 2.60%.
Bank Indonesia (BI) has set this year's inflation target at a range of 1.5% to 3.5%.
In February, BI Governor Perry Warjiyo reiterated the central bank's view that interest rate cuts would begin in the second half of 2024, taking into account developments in inflation and the rupiah exchange rate.
Indonesia's annual inflation rate has remained within the central bank's target range since mid-2023, following the BI's decision to raise interest rates by a total of 250 basis points from August 2022 to October 2023.
„Inflation is accelerating but remains within the BI's target range,“ said Maybank Indonesia economist Mirdar Gunnart. “BI will maintain interest rates until global risks, particularly inflation risks, ease.”
Gunnart predicted annual inflation could rise to 2.9% in April as the Muslim holy month of Ramadan begins in March and spills over into April. Demand and prices for food typically increase during Ramadan. He expected inflation to fall to 2.8% by the end of the year.
M. Habibullah, a senior official at Indonesia's Statistics Authority, told reporters that the prices of rice, chicken, chilli and sugar were the biggest contributors to inflation in February.
According to the national rice price index monitored by the bureau, the retail price of rice in February rose at an annual rate of 19.28% in anticipation of a decrease in production, hitting a record high.
Indonesia expects rice production to decline by 17.52% during the January-April 2024 harvest season.
Core inflation, which excludes government-controlled prices and volatile food prices, stood at 1.68% in February, unchanged from the previous month and below market expectations of 1.71%.
The volatile food inflation rate in February was 8.47%, the highest level since September 2022, the bureau said.
BI said last week it wanted volatile food inflation to be around 5%, and said any rise in food prices would be temporary due to seasonal factors affecting supply.
(1 dollar = 15,688.0000 rupiah)