The inflation rate of the other country, Indonesia recorded the highest jump in 7 years while core inflation remained within the target.
The latest reading indicates that the rate has peaked beyond Indonesia's central bank target, necessitating the implementation of interest rate hikes.
It is understood that the July inflation reading reached 4.94%, which is the highest level since 2015 due to the surge in the price of food, household fuel and air fares as well as the increase in electricity tariffs.
In comparison, the June record was at 4.35% while the forecast was set at 4.82%.
Even so, core inflation is seen to be under control with a record of 2.36% from the set expectation of 2.86%.
In the meantime, policymakers suggest a tightening of monetary policy by Bank Indonesia (BI) even though the main inflation target range is set at 2% to 4% after taking into account core inflation.
Please be informed that BI has increased the bank's reserve requirement ratio, sold bond holdings and reduced excess liquidity in its market operations as a measure to stimulate the Covid-19 pandemic.
Additionally, BI is among the most hawkish central banks with a record low benchmark at 3.50%.
DBS economist Radhika Rao commented that although core inflation is being watched by policy makers the negative real rate and the need to control inflation may push for an increase at the end of the 3rd quarter.
