Although Indonesia’s May consumer prices rose at their quickest pace in more than a year (which exceeded our expectations), Indonesian inflation remains at a comfortable level (for Indonesian standards).
Based on the latest data from Statistics Indonesia (BPS), Indonesia’s headline inflation rose 0.68 percent month-on-month (m/m) in May 2019, or 3.32 percent year-on-year (y/y), well within the inflation targets of the central government (3.5 percent y/y) and the central bank (2.5 – 4.5 percent y/y range).
Indonesia's May inflation was particularly influenced by rising food prices and rising transportation costs. These are normal phenomenons during the Ramadan month (and ahead of the Lebaran festivities); occasions that give rise to a peak in consumption and high demand for transportation (as millions of Indonesians leave the urban areas to spend a holiday in their places or origin, usually in the rural areas).
Meanwhile, airline ticket prices (domestic routes) have somewhat fallen over the past month due to government intervention (declining by around 15 percent) but remain at a very high level compared to one year ago.
Indonesia Investments kept its outlook for Indonesian inflation in full-year 2019 at 4.0 percent (y/y).
Inflation in Indonesia:
Source: Badan Pusat Statistik (BPS)
This article discusses the following:
• Indonesia's May 2019 inflation
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Poll Indonesia Investments: