Indonesia: Inflation falls in January

Consumer prices increased 0.32% in January from the previous month, down from December’s 0.62% increase. January’s print was driven by higher prices in all subsectors except the transportation, communication and financial services subsector.

Inflation dipped from 3.1% in December to 2.8% in January, falling further than markets had expected but remaining within Bank Indonesia’s target range of 3.5% plus or minus 1.0 percentage point. Core inflation was unchanged at 3.1%.

Indonesia Inflation Forecast

Looking ahead, inflation is set to remain fairly subdued and comfortably within the target range, thanks to the recent fall in oil prices and government price controls, with FocusEconomics Consensus Forecast panelists expecting inflation to average 3.6% in 2019 and 3.8% in 2020. As a result, Bank Indonesia is likely to continue conducting monetary policy largely in response to developments in the external sector, particularly the evolution of the rupiah and the current account deficit.