And so, inflationary pressures are rising further in Indonesia, a trend that started in the fourth quarter of 2021, and it is a trend that is likely to persist in Q3-2022 (which is strengthened by the low base effect as inflation was quite mild in Q3-2021).

With annual headline inflation at 4.94 percent (y/y) in July 2022, Indonesia is now seeing its highest inflation since October 2015. It also means that the annual inflation rate has passed beyond the (already revised) consumer price index projections of the central government and Bank Indonesia (which are set at 4.5 percent and 4.5-4.6 percent, respectively). This is quite interesting because it means that Indonesian policymakers are caught by surprise, too, by the pace of inflation. Consequently, this could mean that policymakers become more active to combat accelerating inflation.


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