Indonesia's inflation rose by a mild 0.13 percent month-on-month (m/m) in September 2017, slightly above analysts' forecasts. On an annual basis, the country's inflation eased further to 3.72 percent (y/y). On Monday morning (02/10) Indonesia's Statistics Agency (BPS) released the latest consumer price index data of Southeast Asia's largest economy.
BPS Head Suhariyanto said Indonesia's mild inflation was particularly caused by the "education, recreation & sports group", which rose by 1.03 percent (m/m). This can be explained by the start of the new school year (from the primary school level to the university level). Each year, the start of the new school year triggers additional inflationary pressures in September.
Next - in terms of biggest contributors to September inflation - is the "clothing group" which experienced 0.52 percent (m/m) of inflation, followed by the "processed food, drinks & tobacco group" with a 0.34 percent (m/m) inflation pace.
Suhariyanto added that "there are some commodities that have a relatively big impact on inflation, namely porridge, noodles, rice, side dishes, and clove cigarettes. Their contribution is small, but when combined it becomes significant."
Meanwhile, the only group that experienced deflation was the "foodstuff category", which experienced deflation of 0.53 percent (m/m). Some of the commodities that contributed to deflation of this groups were onions, garlic, chicken eggs, tomatoes, chili, spinach, and kale.
Year-to-date inflation in Indonesia now reached 2.66 percent, while the year-on-year figure eased to 3.72 percent, comfortably within the central bank's target range of 3 - 5 percent (y/y). Meanwhile, the government targets an annual inflation rate of 4.3 percent in the revised 2017 State Budget.
Indonesia's core inflation rate, which excludes administered and volatile food prices, rise slightly 3.00 percent (y/y) in September from 2.98 percent (y/y) in August. Analysts had actually expected it to soften to 2.96 percent (y/y).
Controlled inflation was partly the reason why Indonesia's central bank could implement two rate cuts in August and September. However, a few days ago Bank Indonesia Governor Agus Martowardojo indicated that - most likely - there will not be more rate cuts in 2017.
Inflation in Indonesia:
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank (BI) Target 2008-2016:
(annual % change)
(annual % change)
Source: Bank Indonesia