Indonesia’s consumer price inflation likely to top 5 pct mark by Q4 2017 – DBS Bank

In the year up to April, inflation in Indonesia has averaged just 3.8 percent. According to a DBS Bank research report, the CPI inflation for the whole of 2017 is likely to come in at 4.5 percent, factoring significant acceleration of inflation in the future. There is a possibility of the CPI inflation topping the 5 percent mark later in 2017, added DBS Bank. Meanwhile, Bank Indonesia has set its inflation target at 3 percent to 5 percent for this year.

Inflation would have reached the high of 4 percent by now if it had not been for the unexpected low food inflation this year. Food inflation accounts for 35 percent of the CPI basket and it came in at 3.7 percent in April, the lowest in five years. Food inflation’s contribution to the overall CPI inflation was also at a multi-year low at 1.4 percentage point. Food prices tend to be volatile. With the beginning of the Ramadhan at the end of the month, food inflation might have bottomed in 2017.

“Any marked uptick in food inflation is set to easily push CPI inflation higher going forward, making it likely that CPI inflation may top the 5 percent mark by 4Q17”, stated DBS Bank.