Indonesia Inflation Eases to 3.23% as Core Prices Cool Past Forecasts

Indonesia's annual inflation eased to 3.23% in October from 3.28% in September, Statistics Indonesia said Monday, Tempo reported.

Economists had expected 3.29%, according to Trading Economics. Core inflation fell to 2.56% from 2.84%, a six-month low and below the 2.75% forecast. Prices rose 0.22% from September.

What pushed prices

Food, drinks and tobacco rose 4.82% from a year earlier and added 1.40 percentage points to the total, led by bird's eye chilies, fresh fish, rice, cooking oil, chicken and beef, CNBC Indonesia reported. Transport climbed 4.87%, mostly on gasoline and airfares. Gold jewelry lifted personal care costs 4.52%. Every province saw annual inflation, from 2.52% in Jakarta to 8.07% in North Sulawesi.

How the target works

Bank Indonesia and the government aim for 2.5% inflation, give or take one point, so the band runs from 1.5% to 3.5%, CNBC Indonesia noted. The headline rate sits near the ceiling. Core inflation strips out volatile food and government-set prices like fuel, so central bankers read it as a gauge of underlying demand. On that measure the news is better: prices are cooling.

Volatile food rose 5.81%, the fastest of the three components, while government-set prices rose 3.24%, Tempo reported.

For crypto traders, bitcoin was at $77,937 at 5:54 a.m. ET, little changed over 24 hours, according to CoinGecko.

In our opinion: The headline number looks tight, but the core reading is the one that moves a central bank, and it fell further than forecasters expected. That gives Bank Indonesia more room than a chili-driven headline would imply, as long as food costs stop climbing. Watch the next rate decision and the rupiah, because a central bank's room to cut also depends on its currency.