Regarding Bank Indonesia's inflation target for full-year 2016 (which is set between 3 and 5 percent year-on-year) Governor Martowardojo said he is convinced the target will be achieved as the world's crude oil prices are expected to remain low for the foreseeable future, while there seems to be a relatively limited impact of the El Nino weather phenomenon on Indonesia's food prices.

In the first month of the year inflation rose 0.51 percent (m/m), primarily due to higher prices of food products. In Indonesia there are traditionally two inflation peaks. One during the months of December-January amid rising consumption due to Christmas and New Year celebrations. The second peak comes in June-August when consumption rises due to Islamic celebrations and the start of the new school year.

Read Column: Analysis of Inflation in Indonesia

Eko Listianto, analyst at Indef, said the government needs to continue to monitor food price stability across the nation and improve the distribution networks between the various regions. For example, there are regions in Indonesia that have a surplus in rice, corn and chili production, while other regions are plagued by a deficit hence giving rise to local inflation. In this context, ongoing government-led infrastructure development is vital as distribution bottlenecks are the main source of high logistics costs, particularly outside the island of Java.

Inflation in Indonesia:

Month  Monthly Growth
          2013
 Monthly Growth
          2014
 Monthly Growth
          2015
 Monthly Growth
          2016
January          1.03%          1.07%         -0.24%          0.51%
February          0.75%          0.26%         -0.36%
March          0.63%          0.08%          0.17%
April         -0.10%         -0.02%          0.36%
May         -0.03%          0.16%          0.50%
June          1.03%          0.43%          0.54%
July          3.29%          0.93%          0.93%
August          1.12%          0.47%          0.39%
September         -0.35%          0.27%         -0.05%
October          0.09%          0.47%         -0.08%
November          0.12%          1.50%          0.21%
December          0.55%          2.46%          0.96%
Total          8.38%          8.36%          3.35%

Source: Statistics Indonesia (BPS)

Inflation in Indonesia and Central Bank Target 2008-2015:

   2008  2009  2010  2011  2012  2013  2014  2015
Inflation
(annual percent change)
  9.8   4.8   5.1   5.4   4.3   8.4   8.4   3.4
Bank Indonesia Target
(annual percent change)
  5.0   4.5   5.0   5.0   4.5   4.5   4.5   4.0

Sources: Statistics Indonesia and Bank Indonesia

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