Optimistic Economists Inflationary Pressure Will Remain Low In The Remaining Of 2024

JAKARTA - Bank Permata economist Josua Pardede estimates that inflation will remain within the range of Bank Indonesia's target of 1.5 percent to 3.5 percent for this year.

The annual IHK inflation rate is projected to decline to 1.92 percent on an annual basis or year on year (yoy) in September 2024 compared to August of 2.12 percent (yoy).

Meanwhile, the annual core IHK inflation is estimated to increase slightly from 2.02 percent (yoy) to 2.04 percent (yoy), mainly due to low base effects.

"The annual inflation of the price group regulated by the government is estimated to be relatively stable at the level of 1.69 percent (yoy). On the other hand, annual volatile price inflation is expected to decline significantly from 3.04 percent (yoy) to 0.79 percent (yoy), in line with the decline in food prices," he explained in his statement, Monday, September 30.

Josua said that throughout the remainder of 2024, inflation pressure is likely to remain low, because the government tends to delay the application of sweetened plastic excise and bottled drinks to support purchasing power and economic growth.

In addition, Josua said the risk of imported inflation also tends to be low in line with the trend of strengthening the Rupiah exchange rate. Strengthening the Rupiah exchange rate is also supported by the potential reduction in Fed interest rates, which can increase risk-on sentiment and attract capital flow.

"Inflationary pressure from global energy prices, which is largely due to the uncertainty of Middle East geopoliticals, can be offset by the risk of decreasing global demand," he said.

However, Josua said the risk of an increase could arise towards the end of the year, but was driven more by increased seasonal demand during Christmas and New Year celebrations.

"We project that the inflation rate in 2024 will be around 2.33 percent lower than in 2023 of 2.81 percent," he said.

Josua said that this lower inflation projection could provide space for Bank Indonesia to reduce BI-rate in response to the potential reduction in Fed interest rates.