Indonesia's inflation rate rose 0.51 percent on a monthly basis in January 2016 according to the latest data from Statistics Indonesia (BPS). Suryamin, Head of BPS, said food products accounted for most of the inflationary pressures in the first month of the year. Inflation tends to have a peak in the months December and January due to Christmas and New Year celebrations when consumer demand for various products, including food items, increases (the other peak comes in the June-August period due to Islamic celebrations).

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Indonesia's inflation is expected to accelerate in January 2016 according to the country's central bank (Bank Indonesia). Bank Indonesia detected a spike in prices of several food commodities - such as shallots, chili, and beef - at the start of the year. Bank Indonesia Governor Agus Martowardojo told reporters that he expects the country's inflation rate to rise by around 0.75 percent month-on-month (m/m) in January. This would imply that inflation will accelerate to 4.38 percent on an annual basis (from 3.35 percent y/y in December 2015).

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Although global media focus on the vicious terrorist attacks that occurred today in Jakarta, the country's central bank (Bank Indonesia) made a surprise move by cutting its key interest rate (BI rate) by 25 basis points to 7.50 percent at the January policy meeting. It is a surprise as Bank Indonesia emphasized repeatedly that it is primarily focused on rupiah stability while - amid severe market volatility (due to economic turmoil in China) - the rupiah remains under pressure.

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On 10 January 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as an analysis of the impact of China's economic slowdown on Indonesia, updates of inflation, manufacturing, oil output, Islamic banking, and much more.

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Indonesia's inflation figure in December 2015 was higher than expected at 0.96 percent month-on-month (m/m). The monthly inflation rate was high due to rising prices of food and transportation caused by the Christmas and New Year celebrations. Nevertheless, Indonesia's annual inflation rate fell to the lowest level since 2010 as the impact of the November 2014 subsidized fuel price hike vanished from the annual inflation figure, hence inflation realization falling well below the government target (5 percent) and the central bank's target range (3 - 5 percent) in 2015.

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Last year the benchmark stock index of Indonesia (Jakarta Composite Index) fell 12.13 percent to finish at 4,593.01 points on 30 December 2015 amid severe global uncertainty due to looming tighter monetary policy in the USA and the rapid economic slowdown of China. Today, the Indonesia Stock Exchange will have its first trading day of the new year. What do we expect from the performance of Indonesian stocks in January 2016?

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On 27 December 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as Indonesia's 8th economic stimulus package, inflation, how to set up a legal entity in Indonesia (for foreign investors), updates on Indonesia's coal, cocoa and geothermal industries, and more.

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Indonesian inflation may reach 2.9 percent year-on-year (y/y) only in full-year 2015, the lowest level since 2009 when inflation in Southeast Asia's largest economy was recorded at 2.78 percent (y/y). In recent years Indonesia's inflation has been volatile with peaks correlating with administered price adjustments (primarily fuel and electricity price hikes as the government is keen on limiting spending on subsidies). Another characteristic of Indonesia is that inflation is generally high (compared to advanced economies), which is in line with the higher economic growth pace (than that of advanced economies).

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Bank Indonesia, the central bank of Southeast Asia's largest economy, kept its key interest rate (BI rate) at 7.50 percent at the December policy meeting on Thursday (17/12). Meanwhile, the overnight deposit rate facility (Fasbi) was left unchanged at 5.50 percent and the lending facility at 8.00 percent. It was the tenth consecutive month without changing the country's interest rate environment (in February 2015 the central bank cut the BI rate by 0.25 percent).

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The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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Today (20/10), Central Jakarta seems to have changed into one big party as Joko Widodo was inaugurated as Indonesia’s seventh president earlier this morning. For the remainder of the day celebrations will be held at Monas (National Monument) and surrounding areas. However, it is of vital importance that Widodo (popularly known as Jokowi) will start to focus on this presidential duties tomorrow as the country is facing a number of economic challenges. What are these challenges?

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Bank Indonesia decided to hold the key interest rate (BI rate) at 7.50 percent in October, with the Lending Facility and Deposit Facility rates kept at 7.50 percent and 5.75 percent, respectively. This level is expected to help control inflation at 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level. Despite stable domestic conditions, Bank Indonesia sees risks: contagion risk stemming from US monetary tightening and possible higher subsidized fuel prices.

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The central bank of Indonesia (Bank Indonesia) released a press statement on Wednesday evening (01/10) in which it set out its view on the country’s trade balance and inflation after the latest economic data had been released by Statistics Indonesia (abbreviated BPS) earlier on the day. Based on information of BPS, Indonesia’s September inflation was relatively low at 0.27 percent month-to-month (m/m), while the August trade balance swung back into a deficit at USD $318.1 million.

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The central bank of Indonesia (Bank Indonesia) will not lower its key interest rate (BI rate) until accelerated inflation (brought on by the looming subsidized fuel price hike at the end of the year) has eased and US interest rates are stable (the US Federal Reserve may raise its key interest rate in the second or third quarter of 2015). This implies that the relatively high interest rate environment in Indonesia (the key BI rate has been at 7.50 percent for almost a year) will continue (to safeguard financial stability) at the expense of higher economic growth.

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The central bank of Indonesia (Bank Indonesia) kept its key interest rate (BI rate) at 7.50 percent for the tenth consecutive month as inflation is under control and well within the year-end target of the central bank (3.5-5.5 percent). The lending facility and deposit facility were kept at 7.50 percent and 5.75 percent, respectively, at Thursday’s Board of Governor’s Meeting (11/09). The central bank also expects that the current interest rate environment is capable of curbing the country’s wide current account deficit.

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The government of Indonesia agreed with the House Budget Committee to adjust the economic growth target of Southeast Asia’s largest economy in 2015 to 5.8 percent, 0.2 percentage point up from the initial growth target proposed by the government in the Financial Memorandum as well as the 2015 State Budget Draft (APBN). Still, the 5.8 percent gross domestic product (GDP) growth target constitutes the lowest growth target set in Indonesia’s state budget (excluding revised state budgets) since the year 2010.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) ended at a record high on Wednesday (03/09) as market sentiments were positive after the Indonesian government raised USD $1.5 billion from 10-year dollar-denominated Islamic bonds (known as sukuk) on Tuesday (02/09). Foreign investors submitted USD $10 billion worth of bids, six times the amount offered, showing that they are confident about the country’s current and future economic prospects.

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Speculation has emerged that Indonesian President-elect Joko Widodo (Jokowi) plans to raise prices of subsidized fuels immediately after taking office in late October 2014. On Tuesday (02 /09), Jokowi said that he sees no other option than to raise these prices in an effort to relieve the budget deficit, curb the wide current account deficit and make more funds available for long-term productive public investments (such as on infrastructure, healthcare and education). The government has set aside IDR 291.1 trillion (USD $25 billion) for fuel subsidies in 2015.

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Contrary to the positive performance of the benchmark stock index of Indonesia on Monday’s trading day (01/09) and despite positive domestic economic data released by Statistics Indonesia, the Indonesian rupiah exchange rate depreciated 0.22 percent to IDR 11,716 per US dollar based on the Bloomberg Dollar Index on Monday (01/09). The main reason for the currency’s depreciation is the strengthening US dollar as US economic data are improving and inflation is slowing in the Eurozone.

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In the past days, Indonesia’s fuel subsidy policy has been in the spotlight of Indonesian media continuously. When it was reported that incumbent President Susilo Bambang Yudhoyono (SBY) and newly elected president Joko Widodo would meet on the island of Bali this week to discuss various transitional matters, speculation emerged that the country’s generous fuel subsidies, which seriously burden the government’s budget as well as current account, might be wound down before the new government is inaugurated in October 2014.

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