Economists: Indonesia's Inflation May Rise in the Short Term

On July 2, Kenanga economists stated in a report that they expect Indonesia's inflation to rise in the short term. They noted that rising food and transportation costs, along with the continued weakness of the Indonesian rupiah, may keep price pressures elevated, although inflation is expected to remain within the Bank of Indonesia's target range of 1.5%-3.5%. Kenanga maintained its inflation forecast for Indonesia in 2026 at 3.1%, up from 1.9% in 2025, but believes that if the exchange rate continues to be under pressure, the risks will be skewed to the upside. The agency added that it expects the Bank of Indonesia to maintain a defensive policy stance, potentially raising interest rates by another 25 basis points to support the rupiah and curb inflation.
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