Indonesian headline inflation rises year-on-year in October, BI likely to stand pat in November

Indonesian consumer price inflation accelerated in October on a year-on-year basis, coming in above expectations. On a year-on-year basis, the headline inflation accelerated to 3.16 percent after reaching a two-year low in September. Sequentially, the consumer price inflation rose 0.28 percent in the month, more than reversing a 0.18 percent fall in September. The rise was mainly driven by increased housing costs, and also a recovery in food and transport prices.

Meanwhile, core inflation rose to 2.94 percent on a year-on-year basis. Sequentially, the rate rose 0.29 percent, after recording a similar pace of rise in September. Most components saw sequentially faster growth, with health and education as the main exceptions.

In spite of the hikes to non-subsidized fuel prices last month, inflation is still being suppressed in Indonesia as the prices of the more broad based fuel prices remained the same, noted ANZ in a research report.

“We estimate that a complete benchmarking of domestic prices to global prices will increase headline CPI by 1.7 percent”, stated ANZ.

However, the big picture now is that underlying inflationary pressures continue to be curbed and will not pose a major concern for Bank Indonesia.

“Instead, BI’s main focus will remain on IDR stability. As things stand, easing pressure on IDR in recent weeks suggests the central bank is likely to hold rates steady this month”, added ANZ.