Ni Made Tasyarani, Jakarta – Indonesia's consumer price index (CPI) rose 2.31 percent year-on-year (yoy) in August, easing slightly from 2.37 percent in July, even as food and beverage prices continued to climb.

At a virtual press conference on Monday, Statistics Indonesia (BPS) reported that prices in the food, beverage and tobacco category climbed 3.99 percent yoy in August, up from 3.75 percent a month earlier. The surge pushed inflation in the volatile foods segment, which saw a steep rise of 4.47 percent, driven by spikes in tomatoes, chilies and garlic.

The increase, however, was tempered by softer core inflation, which eased to 2.17 percent from 2.32 percent in July as the midyear surge in education costs faded.

Core inflation, a key gauge of purchasing power, remained underpinned by higher university and elementary school fees as well as gold jewelry prices. Yet a smaller uptick in senior high school costs helped ease the overall pressure.

Meanwhile, administered prices inched up only 1 percent, lifted mainly by airfare and fuel.

Pudji Ismartini, BPS deputy for distribution and services, said the agency recorded deflation of 0.08 percent on a monthly basis, with the CPI easing from 108.60 in July to 108.51 in August.

"The expenditure category contributing most to monthly deflation was food, beverage and tobacco, which recorded deflation of 0.29 percent and contributed 0.08 percentage points to the overall figure," Pudji told the press conference.

August marked the fourth month of deflation this year, following price decreases in January, February and May.

However, Pudji also noted that prices increases in several key commodities, including onions, rice and chilies, contributed to headline inflation.

BPS recorded 0.73 percent inflation in rice prices in August, which contributed 0.03 percentage points to headline inflation. The average price of rice at mills rose 1.87 percent month-on-month (MoM) and 6.15 percent yoy.

"If we categorize rice according to quality at the mill, premium rice rose 2.32 percent MoM or 5.77 percent yoy, while medium-grade rice increased 1.46 percent MoM and 6.58 percent yoy," said Pudji.

A major staple food, rice has faced persistent price pressures in recent months due to seasonal supply constraints and production issues.

According to National Food Agency (Bapanas) head Arief Prasetyo Adi, unhulled rice production dropped to just 2.5 million tonnes in June-July, or half the March-April output, leading to a price spike for both unprocessed and milled rice.

The inflation reading for August remains comfortably within the target range of 1.5 to 3.5 percent as set by Bank Indonesia (BI), giving the central bank room to continue loosening monetary policy to spur growth.

On Aug. 20, BI unexpectedly reduced its benchmark interest rate for the second consecutive month to support economic activity.

Following its two-day monthly policy meeting, BI Governor Perry Warjiyo announced at a press conference that the central bank had cut its key interest rate, the BI-Rate, 25 basis points to 5 percent.

The decision was "consistent" with the low inflation projected for this year and next, as well as with "maintained rupiah exchange rate stability and the need to push economic growth", he said at the time.

Source: https://asianews.network/inflation-in-indonesia-eases-in-august-despite-rising-food-prices