Indonesia's Annual Inflation Cools to 2.88% in July, Undershooting Forecasts as Food Prices Ease

Indonesia's headline inflation rate slowed to 2.88% year-on-year in July 2026, down from 3.34% in June, Statistics Indonesia (BPS) announced on August 3. The reading came in below the roughly 3.2% economists had penciled in, and stayed comfortably inside Bank Indonesia's 1.5%-3.5% target band.

On a monthly basis, consumer prices actually fell 0.14% in July, pulled down by a 0.89% drop in the food, beverage and tobacco group as red onions, red and bird's-eye chilies, chicken eggs, tomatoes, oranges and watermelon all got cheaper. That MoM deflation is why the annual rate cooled even though prices are still higher than a year ago overall — the consumer price index rose from 108.60 in July 2025 to 111.73 in July 2026, a 2.88% increase.

Not everything got cheaper. Transport costs rose 0.52% for the month on higher gasoline and motorcycle prices, and education costs rose 0.55% as the new school year began. Year-on-year, food, beverage and tobacco prices are still up 2.97% (though that's down sharply from 4.67% in June), and transport is up 5.12% annually. Core inflation, which strips out volatile food and administered prices, ran at 2.76% year-on-year, driven by gold jewelry, cooking oil, rice, mobile phones and education fees.

BPS deputy Ateng Hartono flagged one open question: the government's Free Nutritious Meal program (Makan Bergizi Gratis, or MBG) restarted in July alongside the new academic year, and BPS says it cannot yet tell from the monthly data whether either of those pushed food or education prices up — that will need a dedicated follow-up study.