Due to the impact of the rainy season supplies of various agricultural commodities - including shallots and chili - are limited hence causing upward pressure on prices.

Meanwhile, prices of beef have risen around one percent in the first weeks of January as the government introduced a 10 percent value added tax (VAT) on all livestock-related businesses, including cattle and beef imports, late last year. Last week government officials stated that the government will revise (perhaps completely scrapping) this VAT.

Read Column: Analysis of Inflation in Indonesia

At the end of 2015 Indonesian inflation finally eased markedly after two years of high inflation as the government reformed its subsidized fuel policy. With inflation safe and under control at 3.35 percent (y/y) at the end of 2015, Bank Indonesia decided to cut its benchmark interest rate by 0.25 percent to 7.25 percent at the January policy meeting. This year Bank Indonesia targets (annual) inflation within the range of 3 - 5 percent.

Inflation in Indonesia:

Month  Monthly Growth
          2013
 Monthly Growth
          2014
 Monthly Growth
          2015
January          1.03%          1.07%         -0.24%
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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