Economist at UOB Group Enrico Tanuwidjaja reviews the latest inflation figures in Indonesia.

Key Takeaways

“Indonesia’s annual inflation rate rose to 1.87% y/y in December vis-à-vis 1.75% a month earlier, higher than market expectation of 1.80% (Reuters). This was the highest inflation rate since May, amidst loosening restrictions in some regions in the country. On a month-on-month basis, Indonesia’s inflation came in at 0.57% inflation in December, following a reading of 0.37% m/m in November. Annual core inflation rate rose slightly to 1.56% y/y in December (vs. November’s at 1.44%) and volatile prices component slowed to 3.20% y/y (vs. November 3.05%).”

“Going forward, we expect the headline inflation to gradually recover, and exceed the lower end of the government’s inflation target (2.0% - 4.0%), as the daily COVID-19 cases are now more under control. With the inflation still below the central bank’s target range; Bank Indonesia (BI) will have the policy space to remain accommodative to support the economic recovery.”