Indonesia Macro Update - Inflation Update 03 Aug 2026
KBVS MACRO UPDATE
Monday, 3 August 2026
Food Deflation Pulls July Inflation Lower
Indonesia's headline inflation came in softer than expected in Jul '26, with CPI recording a -0.14% MoM deflation and annual inflation easing to 2.88% YoY. Improving horticultural harvests triggered a broad correction in volatile food prices, more than offsetting seasonal increases in transportation and education costs. Core inflation remained stable at 2.76% YoY, suggesting that underlying inflationary pressures remain contained despite short-term food price volatility.
The softer inflation print reinforces our expectation that Bank Indonesia will maintain its policy rate, with monetary policy continuing to prioritize rupiah stability and external financial conditions over domestic inflation dynamics. With inflation remaining well anchored within Bank Indonesia's target range, we believe Bank Indonesia could adjust the BI Rate at any time if necessary to safeguard rupiah stability, meaning future monetary policy adjustments could occur at any time and be driven more by exchange rate stability than by domestic inflation itself.
Regards,
Khairunnisa N Syahfiraputri & Anggun Rahmadani- KBVS Research Team