On a year-on-year basis, Indonesian inflation remained at 7.26 percent (y/y) in July, exactly the same level as last month. However, most analysts expected inflation to ease in July as the people’s purchasing power has weakened.

Calendar year inflation (January-July 2015) rose to 1.90 percent. Meanwhile, core inflation (which excludes volatile food and administered prices) eased to 4.86 percent (y/y) from 5.04 percent (y/y) last month.

Considering that inflation is still far above the central bank’s target range (3-5 percent y/y), the central bank is not expected to cut its benchmark interest rate (BI rate) at the next Board of Governor’s Meeting (scheduled for 18 August). Currently, the BI rate stands at 7.50 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%
September         -0.35%          0.27%
October          0.09%          0.47%
November          0.12%          1.50%
December          0.55%          2.46%
Total          8.38%          8.36%          1.90%

Source: Statistics Indonesia (BPS)

Inflation in Indonesia 2008-2014:

     2008    2009    2010    2011    2012    2013    2014
Inflation
(annual percent change)
    9.8     4.8     5.1     5.4     4.3     8.4     8.4

Source: World Bank

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