Indonesia's inflation rate eased to 2.42% year-on-year in April, down from 3.48% in March, according to UOB analysts Enrico Tanuwidjaja and Vincentius Ming Shen. This figure came in below market expectations of 2.70% and remains comfortably within Bank Indonesia’s (BI) target range of 2.5% ±1.0% [1]. The moderation in inflation is attributed to post-holiday normalization, contained energy inflation due to subsidized fuel, and steady core inflation [1].
Despite the current stability, UOB analysts highlight that risks are tilted to the upside, particularly from higher global oil prices. Rising Brent crude prices could significantly increase logistics and transport costs, which may indirectly feed into both core and food inflation [1]. The government is expected to focus on controlling logistics costs and food prices in coordination with BI through the Movement for Inflation and Food Prosperity (GPIPS) [1].
Looking ahead, the stable inflation outlook provides Bank Indonesia with room to maintain its policy rate at 4.75%. This stance may be sustained even if it results in a weaker rupiah, as BI supports the government’s expansionary fiscal policy [1].
CONCLUSION
Indonesia's inflation has slowed more than expected, providing Bank Indonesia with flexibility to maintain its current policy rate. However, upside risks from rising global oil prices remain, prompting continued government and central bank coordination on food and logistics costs.