Although food prices indeed continued to slide in Indonesia over the past month, there were significant inflationary pressures originating from the government's decision to raise electricity tariffs for 900 VA households in March 2017 (this was the second round of the government's electricity subsidy reform program this year).

On an annual basis, Indonesian inflation surged to 4.17 percent (y/y) in April 2017, a 13-month high and above the outlook that was given by most analysts. The nation's core inflation, excluding government administered and volatile food prices, was recorded at 3.28 percent in April.

The central bank of Indonesia (Bank Indonesia) targets to see full-year 2017 inflation within the range of 3 - 5 percent (y/y). Provided the government can keep inflationary pressures under control in the remainder of 2017 (specifically food prices), then this target can be achieved.

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%
June      1.03%      0.43%      0.54%      0.66%
July      3.29%      0.93%      0.93%      0.69%
August      1.12%      0.47%      0.39%     -0.02%
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%

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

Discuss