Meanwhile, Indonesia's core inflation was recorded at 0.28 percent (m/m) or 2.98 percent (y/y) in August. Calendar-year inflation (January-August 2017) eased to 2.53 percent, implying chances are big that the year-end inflation figure of Indonesia will fall comfortably within the central bank's 3-5 percent (y/y) target and will possibly fall below the central government's 4.3 percent (y/y) inflation target as set in the revised 2017 state budget.

Suhariyanto, Head of BPS, said Indonesia's August deflation occurred due to several factors. For example, falling prices of onion, garlic, vegetables and fish. Lower prices in transportation, communication, and financial services were also cited as key factors for August deflation.

For Indonesian standards, the current annual 3.82 percent (y/y) inflation rate is actually very low (see tables below). Controlled inflation is one of the key reasons why Indonesia's central bank (Bank Indonesia) was able to cut its benchmark interest rate drastically since late-2015.

Inflation in Indonesia:

Month M/M Growth
      2013
M/M Growth
      2014
M/M Growth
      2015
M/M Growth
      2016
M/M Growth
      2017
January      1.03%      1.07%     -0.24%      0.51%      0.97%
February      0.75%      0.26%     -0.36%     -0.09%      0.23%
March      0.63%      0.08%      0.17%      0.19%     -0.02%
April     -0.10%     -0.02%      0.36%     -0.45%      0.09%
May     -0.03%      0.16%      0.50%      0.24%      0.39%
June      1.03%      0.43%      0.54%      0.66%      0.69%
July      3.29%      0.93%      0.93%      0.69%      0.22%
August      1.12%      0.47%      0.39%     -0.02%     -0.07%
September     -0.35%      0.27%     -0.05%      0.22%
October      0.09%      0.47%     -0.08%      0.14%
November      0.12%      1.50%      0.21%      0.47%
December      0.55%      2.46%      0.96%      0.42%
Total      8.38%      8.36%      3.35%      3.02%      2.53%

Source: Statistics Indonesia (BPS)

Inflation in Indonesia and Central Bank (BI) Target 2008-2016:

  2008 2009 2010 2011 2012 2013 2014 2015 2016
Inflation
(annual % change)
 9.8  4.8  5.1  5.4  4.3  8.4  8.4  3.4  3.0
BI Target
(annual % change)
 5.0  4.5  5.0  5.0  4.5  4.5  4.5  4.0  4.0

Source: Bank Indonesia

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