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INDONESIA: Inflation Contained, BI To Focus On FX Stability

INDONESIA

To one decimal place Indonesian headline inflation picked up 0.1pp to 1.6% y/y but actually it was only 0.02pp higher. It continues to hover just above the bottom of Bank Indonesia’s (BI) 1.5-3.5% target band. Core CPI inflation was unchanged at 2.3% y/y. BI next meets on January 15 and with USDIDR up 1% since the last meeting to 16220, another rate cut is looking less likely.

  • There was a pickup in annual inflation rates for food, drinks & tobacco, eating out and healthcare, while transportation fell to -0.3% y/y from 0% and personal care and recreation were also lower. All categories were either higher or unchanged on the month in December with food, drinks & tobacco and healthcare posting the largest monthly rises.
  • Core was driven by higher gold jewellery, cooking oil, coffee and home rents.
  • The central bank expects inflation to remain within its corridor in 2025 and so this data is unlikely to change its focus on FX stability. While it will be concerned about USDIDR staying above 16000, it should be reassured by the JP Morgan NEER rising 1.3% since December 19. A significant amount of the USDIDR move is due to the stronger greenback. The USD BBDXY index is up 0.3% since December 19.
  • The December S&P Global PMI showed the weaker rupiah boosting cost pressures and firms maintaining margins by increasing selling prices for the third straight month.
  • Headline inflation moderated 1pp over 2024 while core rose 0.6pp. 

Indonesia CPI y/y%

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To one decimal place Indonesian headline inflation picked up 0.1pp to 1.6% y/y but actually it was only 0.02pp higher. It continues to hover just above the bottom of Bank Indonesia’s (BI) 1.5-3.5% target band. Core CPI inflation was unchanged at 2.3% y/y. BI next meets on January 15 and with USDIDR up 1% since the last meeting to 16220, another rate cut is looking less likely.

  • There was a pickup in annual inflation rates for food, drinks & tobacco, eating out and healthcare, while transportation fell to -0.3% y/y from 0% and personal care and recreation were also lower. All categories were either higher or unchanged on the month in December with food, drinks & tobacco and healthcare posting the largest monthly rises.
  • Core was driven by higher gold jewellery, cooking oil, coffee and home rents.
  • The central bank expects inflation to remain within its corridor in 2025 and so this data is unlikely to change its focus on FX stability. While it will be concerned about USDIDR staying above 16000, it should be reassured by the JP Morgan NEER rising 1.3% since December 19. A significant amount of the USDIDR move is due to the stronger greenback. The USD BBDXY index is up 0.3% since December 19.
  • The December S&P Global PMI showed the weaker rupiah boosting cost pressures and firms maintaining margins by increasing selling prices for the third straight month.
  • Headline inflation moderated 1pp over 2024 while core rose 0.6pp. 

Indonesia CPI y/y%

Keep reading...Show less