June 28, 2019 / 4:25 AM / 3 months ago

Indonesia's annual inflation rate seen slowing in June

A vegetable vendor takes money from the customer during a transaction at a traditional market in Jakarta, Indonesia, May 2, 2019. REUTERS/Willy Kurniawan

(Reuters) - Indonesia’s annual inflation rate is seen slowing in June from a month earlier as prices of goods and services return to normal following the Muslim fasting month of Ramadan, a Reuters poll showed.

The consumer price index (CPI) was predicted to rise 3.18% from a year earlier, according to the median forecast of 13 economists polled by Reuters, cooling from the 3.32% inflation rate in May and staying within Bank Indonesia’s (BI) 2.5%-4.5% comfort range.

Inflation rate typically peaks during Ramadan in the Muslim-majority country as people ramp up spending before the Eid al-Fitr festival, which this year fell on June 5.

Economists said relatively low inflation readings, a narrowing current account deficit, and a stable rupiah provide room for BI to cut interest rates, unwinding the total of 175 basis point hikes the central bank did in 2018.

BI Governor Perry Warjiyo last week said an interest rate cut “is a matter of timing”, as inflation was expected to stay within target throughout the year, though such move would depend on sentiment in global financial markets.

Maybank Indonesia’s chief economist Juniman said June inflationary pressures stemmed from rising prices of foodstuffs such as chilli, red pepper, and rice as well as gold.

The annual core inflation rate, which excludes government-controlled and volatile food prices, is seen at 3.12% in June, virtually the same as in May, according to a median of 10 analysts.

Polling by Nilufar Rizki, Tabita Diela and Fransiska Nangoy; editing by Gopakumar Warrier

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