Indonesia's inflation accelerated moderately in January to 4.14%, as compared with Barclays expectations of 4.3% and consensus expectations of 4.26%. Inflation accelerated due to lower base, as fuel prices were reduced in 2015 after oil price considerably declined. On a seasonally adjusted monthly basis, prices moderated 0.12%, mainly driven by lower transportation costs that countered the seasonal rise in food prices.

"With the government lowering the price of premium gasoline to IDR7,150/litre from IDR7,400/litre and the price of diesel to IDR5,950/litre from IDR6,700/litre (effective from 5 January), we recently lowered our 2016 inflation forecast 20bp, to 4.2% y/y", says Barclays.

Food inflation is speeding up and added 1.29pp to the headline rate. Meanwhile, core inflation decelerated to 3.62% in January on the high year-earlier base, and also because of moderation in service and housing costs.

There is a possibility of further easing as inflation is expected to decelerate within the Bank of Indonesia's target range of 3%-5% throughout 2016. Indonesia's inflation path continues to be consistent with the central bank's monetary stance of lowering rates as it attempts to help growth amidst weaker consumption.

The BI is expected to lower rate during its policy meeting in March. However, the central bank's dovish comments and a lower CPI data for January indicate that a second cut might take place as soon as February. If inflation continues to be low, there might be a scope for further easing after Q1 also; however, this will also depend on external factors.