INDONESIA: Inflation Contained But IDR May Mean BI On Hold In December

Indonesia is the first in the region to release November CPI inflation data. Headline eased to 1.55% y/y from 1.7%, close to expectations and the bottom of Bank Indonesia’s (BI) 1.5-3.5% target corridor. Core continued trending higher picking up moderately to 2.3% from 2.2%, slightly higher than consensus. This may not be enough though for BI to cut rates at its December 18 meeting given that USDIDR is up 0.4% since the November decision to 15900 and NEER 0.3% lower. FX stability is its focus while inflation is contained.

• Underlying inflation troughed in January but is now up 0.6pp since then, but still below the mid-point of BI’s band.
• Lower rice prices, which fell in October and then again in November, have helped to moderate headline inflation. Volatile food prices fell 0.3% y/y in November helped by increased supply from new harvests.
• There was a slight increase in annual transportation prices to flat from -0.1%. Personal care continued rising up to 7.3% y/y from 7.1%. The other major categories, apart from food, showed steady year ago inflation rates.
• The 0.3% m/m nsa rise in the headline CPI was driven by higher food prices, especially shallots and tomatoes. Food, drinks & tobacco prices rose 0.8% m/m and dining out 0.2%. Transportation was up 0.1% and personal care 0.65%.

Indonesia CPI y/y%