Indonesia's headline inflation in Sep eased to 2.3% y/y vs 3.3% in Aug on the back of lower inflation in almost all components, except for food & beverages (F&B) and infocomm. Supply restrictions drove prices of rice, garlic, chicken meat, fish, and other food commodities higher in Sep. In addition, disruptions in the global rice supply chain as a result of export restrictions by several rice exporters has led to higher food inflation in Sep. 

Sep's inflation data reinforces our view for 2023 inflation to come lower than previously expected. We reduced our 2023 inflation forecast from 3.8% y/y to 3.6% (2022: 4.2%) due to faster than expected declines in core and administered price inflation. However, we do not exclude the risks that the recent rupiah depreciation could potentially add some upside to inflation in 4Q23.