Indonesia: Inflation accelerates in January from the prior month
Latest reading: Consumer prices rose 3.5% on a year-on-year basis in January, following a 2.9% rise in the prior month. January’s reading was the strongest since May 2023. As such, inflation rose to the upper bound of Bank Indonesia’s 1.5–3.5% target range.
Relative to the prior month’s figures, price pressures were higher for housing, water, electricity and household fuels in January (+11.9% in annual terms vs +1.6% in December). In contrast, there were reduced price pressures for clothing and footwear (+0.6% vs +0.7% in December), transport (+0.6% vs +1.2% in December), recreation and entertainment (+1.1% vs +1.2% in December) and food, beverages and tobacco (+1.5% vs +4.6% in December).
The reading for housing and utilities shot up due to a low base effect in electricity and a holiday-related surge in demand.
Meanwhile, core consumer prices increased 2.5% in annual terms in January, following a 2.4% increase in the previous month.
Lastly, consumer prices fell 0.15% in January on a month-on-month basis, following a 0.64% rise in the previous month.
Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja and Vincentius Ming Shen said:
“All-in-all, the upshot in Jan inflation is likely to be transient in nature. While annual inflation was slightly above BI’s target range, the drivers were temporary rather than structural, minimizing risks to monetary policy, which remains focused on transmission effectiveness. Monthly deflation underscored the effectiveness of government measures, though base effects created “artificial” inflation. Looking ahead, inflation is expected to remain within BI’s target of 2.5% ± 1.0%, supported by government stimulus packages and measures that are likely keeping inflation well within BI’s target.”