Inflation May Accelerate to 4.38% in January

Supplies of shallots and chili, staple ingredients in Indonesian meals, are often low during the rainy season, propping up the prices index, said Sasmito Hadi Wibowo, the deputy of goods and services distribution at the Central Statistics Agency (BPS).

Beef prices are also on the rise, increasing by 1 percent alone this month after the government slapped a 10 percent value added tax on beef trade and import in the beginning of this year. Officials reversed the policy on Friday.

Bank Indonesia has targeted an inflation rate of between 3 percent and 5 percent this year.

The central bank just cut its benchmark interest rate to 7.25 percent last week as it seeks to stimulate bank lending and boost growth, but an accelerating inflation would undermine its ability to trim the interest rate further.

The government aims to expand Southeast Asia’s largest economy by 5.3 percent this year, rebounding from an estimated 4.7 percent last year, its slowest pace since 2009.