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INDONESIA: VIEW: Goldman Sachs Sees Low Inflation As Temporary, BI To Cut In Q2

INDONESIA
EM BulletAPACEmerging Market NewsBulletIndonesiaMarketsFixed Income Bullets

Headline CPI inflation printed significantly below expectations in January due to a 50% discount on electricity rates for some customers. It printed at 0.8% y/y down from 1.6% y/y, while core ticked up 0.1pp to 2.4% y/y due to higher gold prices. Goldman Sachs continues to forecast that Bank Indonesia will again cut rates 25bp in Q2 with the risks “balanced” around the view. It sees the low inflation outcomes in January/February as “likely to be temporary if the electricity tariff discounts are reversed from March as currently planned”.

  • Goldmans notes that “Indonesia's headline CPI inflation fell significantly to 0.8% yoy in January, the lowest since 2000. Today's reading was meaningfully below our and Bloomberg consensus expectations. On a seasonally adjusted sequential basis, headline CPI inflation fell 0.9% mom s.a. in January, after rising 0.2% mom s.a. in the previous month”.
  • “Housing, water, electricity & household fuels inflation slowed to -8.8% yoy in January (vs. 0.6% yoy in December) due to a temporary 50% electricity tariff discount. This shaved 1.4pp from headline inflation in January, compared to a +0.1pp contribution the previous month.”
  • “Meanwhile, food, beverage & tobacco inflation increased 3.7% yoy in January (vs. 1.9% yoy in December) mainly due to higher red chili, rice and protein prices. This contributed 1.0pp towards headline inflation in January, compared to 0.5pp the previous month.”
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Headline CPI inflation printed significantly below expectations in January due to a 50% discount on electricity rates for some customers. It printed at 0.8% y/y down from 1.6% y/y, while core ticked up 0.1pp to 2.4% y/y due to higher gold prices. Goldman Sachs continues to forecast that Bank Indonesia will again cut rates 25bp in Q2 with the risks “balanced” around the view. It sees the low inflation outcomes in January/February as “likely to be temporary if the electricity tariff discounts are reversed from March as currently planned”.

  • Goldmans notes that “Indonesia's headline CPI inflation fell significantly to 0.8% yoy in January, the lowest since 2000. Today's reading was meaningfully below our and Bloomberg consensus expectations. On a seasonally adjusted sequential basis, headline CPI inflation fell 0.9% mom s.a. in January, after rising 0.2% mom s.a. in the previous month”.
  • “Housing, water, electricity & household fuels inflation slowed to -8.8% yoy in January (vs. 0.6% yoy in December) due to a temporary 50% electricity tariff discount. This shaved 1.4pp from headline inflation in January, compared to a +0.1pp contribution the previous month.”
  • “Meanwhile, food, beverage & tobacco inflation increased 3.7% yoy in January (vs. 1.9% yoy in December) mainly due to higher red chili, rice and protein prices. This contributed 1.0pp towards headline inflation in January, compared to 0.5pp the previous month.”