In line with expectations, Indonesia's inflation rate accelerated in February 2017, particularly due to higher prices in the category "housing, water, electricity, gas and fuel". On Tuesday (01/03) Statistics Indonesia announced that Indonesia's annual headline inflation rose to 3.83 percent (y/y), up from 3.49 percent (y/y) in the preceding month. On a monthly basis, Indonesian inflation was recorded at 0.23 percent (m/m), the highest monthly February inflation figure since 2014.
Meanwhile, Indonesia's core inflation, which excludes volatile food prices as well as administered prices, accelerated to 3.41 percent (y/y) in February 2017, up from 3.35 percent (y/y) from the preceding month.
Ahead of the announcement, all analysts agreed that Indonesia would see rising inflation in February due to the ongoing impact of higher electricity tariffs that were introduced by the government in the first month of the year as well as a number of big floods that curtail distribution channels across parts of Sumatra and Java. However, Indonesia's February 2017 inflation figure was slightly below estimates. While analysts generally expected the monthly inflation figure in the range of 0.25 - 0.30 percent (m/m), Indonesia's February headline inflation figure only reached 0.23 percent, hence a relatively good performance.
Bank Indonesia, the central bank of Indonesia, targets for annual inflation in the range of 3 - 5 percent (y/y) this year. With Indonesia's February 3.83 percent (y/y) inflation figure, it is still comfortably within that range. However, we do not expect to see any monetary easing from Bank Indonesia soon due to looming higher interest rates in the USA.
Inflation in Indonesia:
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank (BI) Target 2008-2016:
(annual % change)
(annual % change)
Source: Bank Indonesia