Indonesia: Inflation falls more than expected in July: supports our call for a pause in August amid elevated policy uncertainty

Research evidence excerpt

Indonesia: Inflation falls more than expected in July: supports our call for a pause in August amid elevated policy uncertainty

J P M O R G A N Asia Pacific Economic Research

03 August 2026

Indonesia: Inflation falls more

than expected in July

… supports our call for a pause in August amid elevated

policy uncertainty

• Headline CPI inflation fell to a lower-than-expected 2.9%oya in July from Emerging Markets Asia, Economic

3.3% in June, driven by a sharp decline in food price inflation. and Policy Research

• Core inflation was unchanged at 2.8%, as expected, but this masked broader Charnon Boonnuch

price pressures beyond the decline in gold jewelry prices. (65) 6807 5086

charnon.boonnuch@jpmorgan.com

• We maintain our 2026 headline inflation forecast of 3.4% but see upside risks JPMorgan Chase Bank, N.A., Singapore Branch

to our core inflation forecast of 2.5%, amid the weakening IDR.

• Our baseline remains for Bank Indonesia (BI) to pause in August before hiking

again by another 25bp in September to 6.00%.

• While we expect FX pressures to persist, we acknowledge that the uncertainty

around the policy outlook is rising owing to the leadership transition.

Food-driven disinflation

Headline CPI inflation fell to a lower-than-expected 2.9%oya in July (Consensus

and J.P. Morgan: 3.2%) from 3.3% in June (Figure 1). In sequential and seasonally

adjusted (sa) terms, this implies headline inflation fell to 0.0% m/m sa from 0.4%.

The surprise to our forecast was driven by food, beverage and tobacco price

inflation, which fell sharply to 3.0%oya from 4.7%. According to the press release,

this reflects volatile food components such as shallots, chilies and eggs, for

example. This easily offset a slight uptick in energy price inflation to 3.3% oya

from 2.9% (Appendix 1).