By Ying Xian Wong
Indonesia's consumer inflation picked up last month as higher energy prices continued to push up prices.
The headline consumer-price index rose 3.34% in June from a year earlier, accelerating from the 3.08% increase in May, reflecting higher food, transportation and personal care prices, the statistics agency said Wednesday. Core inflation was 2.76%, up from 2.59% in May.
The easing of Middle East tensions should reduce pressure on energy-related costs such as airfare and transport, ANZ economist Krystal Tan said in a recent note. However, broader inflation risks persist due to the weak rupiah and the potential for higher food prices, she wrote.
Indonesia's widening current account deficit and softer foreign direct investment have also increased the country's reliance on portfolio inflows, leaving the rupiah more vulnerable to shifts in global risk sentiment, according to Tan.
As a result, Bank Indonesia may raise its policy rate to at least 6.00% in 2026, with a possible increase to 6.50% if confidence in the rupiah weakens further or the Federal Reserve adopts a more hawkish stance, she said.
Write to Ying Xian Wong at yingxian.wong@wsj.com