Indonesia: Inflation will not be a barrier for a rate cut – ANZ

Indonesia released headline inflation data and came within the central bank’s 2-4% target band, strategists at ANZ Research reports. USD/IDR is trading at 14205.75. 

Key quotes

“Indonesia’s headline inflation came in at 2.98% y/y in February, up from 2.68% in January, but still comfortably within the central bank’s 2-4% target band.” 

“The rise reflected a pick-up in volatile food inflation, which more than offset a slight moderation in administered price and core inflation. Inflation won’t be a barrier to monetary policy easing, but the recent downward pressure on the rupiah makes a rate cut this month unlikely.”

“The combination of sluggish growth and benign inflation points to an easing bias. However, the downturn in risk sentiment and recent weakness in the rupiah has reduced the odds of a rate cut in March. We have pencilled in a 25bp rate cut in Q2.”