Indonesia's December core inflation (excluding volatile and administered prices) slowed to 3.95 percent (y/y) from 4.77 percent (y/y) one month earlier.

Low inflation opens up room for Bank Indonesia to consider an interest rate cut. Currently, the benchmark interest rate (BI rate) is still relatively high at 7.50 percent. However, over the past months Bank Indonesia has emphasized repeatedly that it prefers financial stability over accelerated economic growth. As the global environment is still plagued by uncertainties (China's economic slowdown and more looming US interest rate hikes in 2016), the Indonesian rupiah remains fragile.

In 2016 Bank Indonesia targets an inflation rate in the range of 3 - 5 percent (y/y).

Read Column: Analysis of Inflation in Indonesia

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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