Bank Indonesia: Spike in Food Commodity Prices, Inflation Rising
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).
Due to the impact of the rainy season supplies of various agricultural commodities - including shallots and chili - are limited hence causing upward pressure on prices.
Meanwhile, prices of beef have risen around one percent in the first weeks of January as the government introduced a 10 percent value added tax (VAT) on all livestock-related businesses, including cattle and beef imports, late last year. Last week government officials stated that the government will revise (perhaps completely scrapping) this VAT.
Read Column: Analysis of Inflation in Indonesia
At the end of 2015 Indonesian inflation finally eased markedly after two years of high inflation as the government reformed its subsidized fuel policy. With inflation safe and under control at 3.35 percent (y/y) at the end of 2015, Bank Indonesia decided to cut its benchmark interest rate by 0.25 percent to 7.25 percent at the January policy meeting. This year Bank Indonesia targets (annual) inflation within the range of 3 - 5 percent.
Inflation in Indonesia:
| Month | Monthly Growth 2013 |
Monthly Growth 2014 |
Monthly Growth 2015 |
| January | 1.03% | 1.07% | -0.24% |
| February | 0.75% | 0.26% | -0.36% |
| March | 0.63% | 0.08% | 0.17% |
| April | -0.10% | -0.02% | 0.36% |
| May | -0.03% | 0.16% | 0.50% |
| June | 1.03% | 0.43% | 0.54% |
| July | 3.29% | 0.93% | 0.93% |
| August | 1.12% | 0.47% | 0.39% |
| September | -0.35% | 0.27% | -0.05% |
| October | 0.09% | 0.47% | -0.08% |
| November | 0.12% | 1.50% | 0.21% |
| December | 0.55% | 2.46% | 0.96% |
| Total | 8.38% | 8.36% | 3.35% |
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank Target 2008-2015:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Inflation (annual percent change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 8.4 | 8.4 | 3.4 |
| Bank Indonesia Target (annual percent change) |
5.0 | 4.5 | 5.0 | 5.0 | 4.5 | 4.5 | 4.5 | 4.0 |
Sources: Statistics Indonesia and Bank Indonesia
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