Indonesia: Inflation rose to multi-month highs in September- UOB

Economist at UOB Group Enrico Tanuwidjaja and Yari Mayaseti assess the latest inflation figures in Indonesia.

Key Takeaways

“Indonesia’s annual inflation rate stood at 1.60% y/y in September vis-à-vis 1.59% a month earlier, but slightly below market expectations at 1.69% (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 posted 0.04% deflation in September, following 0.03% inflation in August.”

“Annual core inflation rate slowed slightly to a 5-month low of 1.30% y/y in September (vs. August’s 1.31%) and volatile prices component slowed to 3.51% y/y (vs. August’s 3.80%). Meanwhile, the government-administered prices component rose in September to 0.99% y/y vs. 0.65% in the previous month.”

“Going forward, we expect the headline inflation to gradually recover, and exceed the lower end of the government's 2021 inflation target (2.0% - 4.0%), as the daily COVID-19 cases come under control and the economic activity picks up with the gradual easing of social restriction.”