Indonesia's annual inflation rate cooled more than expected in December to 2.61%, within the central bank's target range, official data showed on Tuesday.

The rate was below November's 2.86% and expectations in a Reuters poll for a December reading of 2.72%.

The central bank's inflation target for 2023 was 2% to 4%, while its 2024 target is 1.5% to 3.5%.

The core inflation rate, which strips out government-controlled prices and volatile food prices, also eased more than expected in December to 1.80%, the lowest level since December 2021, and compared with 1.85% predicted in the poll. November's core inflation was 1.87%.

The central bank, Bank Indonesia, raised interest rates by a total of 250 basis points between August 2022 and October 2023 to fight inflation and maintain currency stability.

DBS Bank economist Radhika Rao said December's lower-than-expected inflation rate would provide comfort for monetary policymakers.

"We expect the policymakers to exhibit a lower urgency to shift towards an easing cycle in 1H24 to preserve finance stability," she said.

Rao said headline inflation could rise above 3% in the first half of 2024 as price pressures build around religious holidays, such as Ramadan, which is expected to start in March.

BI officials have predicted headline inflation may reach 3.2% this year due to higher global food and energy prices. (Reporting by Stefanno Sulaiman, Gayatri Suroyo and Fransiska Nangoy; Editing by Kanupriya Kapoor and Neil Fullick)