Indonesia: Consumer prices swing into decline in February
Latest reading: Consumer prices fell 0.1% on an annual basis in February, swinging from January’s 0.8% increase. February’s reading marked the largest fall in consumer prices since March 2000 and was due to a government subsidy for electricity. Looking at the details of the release, prices for housing and utilities dropped at a sharper rate, while price pressures for food softened further.
Annual average inflation edged down to 1.9% in February (January: 2.1%). Meanwhile, core inflation ticked up to 2.5% in February from January’s 2.4%.
Lastly, consumer prices fell 0.48% over the previous month in February, after January’s 0.76% fall.
Outlook: Deflation is likely to be short-lived: The electricity rebate expired in February, and the upcoming holiday season should bring inflation back in the coming months. Our panelists see inflation accelerating through Q4 2025 and averaging close to 2024’s level this year as a whole, fueled by healthy domestic demand and monetary policy easing. A weaker-than-expected rupiah is an upside risk.
Panelist insight: EIU analysts said:
“The anticipated weakening of the rupiah in the months ahead will maintain price pressures on imported commodities, such as rice and petroleum. The delay in the government’s VAT increase on non-luxury goods will partially offset these price pressures. We expect headline inflation to remain modest in 2025-29, averaging 3%, well within the BI’s target range of 1.5-3.5%.”