The Governor of Indonesia's central bank (Bank Indonesia), Agus Martowardojo, expects that the pace of inflation in Indonesia in January 2014 is most likely to become one of the lowest January inflation rates in the last five years although it remains important that food supplies are maintained at safe levels. The higher price of LPG in Southeast Asia's largest economy is expected to contribute only slightly to January's inflation rate. Martowardojo also stated that Indonesia's macroeconomy is stable at the start of a new year.

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The performance of the Indonesia rupiah exchange rate on Friday morning (10/01) was rather stagnant against the US dollar (the latter's movement was mixed against currencies in the Asia-Pacific) although the rupiah was up 0.12 percent to IDR 12,178 per US dollar at 13:42 local Jakarta time based on the Bloomberg Dollar Index. Positive sentiments are caused by Indonesia's narrowing current account deficit (possibly less than 3 percent of GDP in Q4-2013) and rising foreign exchange reserves at end-December 2013.

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Indonesia's central bank (Bank Indonesia) kept its benchmark interest rate (known as the BI rate) at 7.50 percent in today's Board of Governor's meeting (09/01). The institution decided not to change its interest rate because it estimates that the inflation target for 2014 is not in jeopardy (4.5 percent) while Indonesia's economic growth prospects for 2014 and 2015 remain unchanged. Also the overnight lending facility as well as deposit facility rate (Fasbi) were kept at 7.50 percent and 5.75 percent respectively.

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Supported by legislative and presidential elections, car sales in Indonesia are expected to grow between five and ten percent to 1.30 million total vehicles in 2014. These elections are estimated to boost the domestic money flow due to increased economic activity in Southeast Asia's largest economy. Consumption goods such as cars and food & beverage products are expected to feel the impact of this development and may offset the negative impact brought on by the weak rupiah, high inflation and the high interest rate environment.

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On Thursday (02/01), Statistics Indonesia (BPS) released the December 2013 inflation figure of Indonesia as well as the calender inflation rate for full-year 2013. Higher food prices and house prices were the main contributors to the 0.55 percent inflation rate in December 2013. Seasonal celebrations, like Christmas and New Year, always translate into higher inflationary pressures in Southeast Asia's largest economy. Higher fuel prices were the main contributor to the 8.38 percent inflation rate in full-year 2013.

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Ahead of the new year, the Indonesia rupiah exchange rate continues its downward trend on Monday (30/12). Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) fell to IDR 12,270 per US dollar from IDR 12,260 on the previous trading day. Due to the improving US economy, the US dollar keeps appreciating against the majority of emerging currencies. At most local Indonesian banks, the rupiah is traded significantly above the psychological level of IDR 12,000 per US dollar.

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The central bank of Indonesia (Bank Indonesia) expects that the country’s inflation figure in December 2013 (month-to-month) will be below 0.5 percent. Up to the third week of December, inflation increased 0.36 percent according to data from Bank Indonesia. Considering the month of December always brings along inflationary pressures due to seasonal celebrations (Christmas and New Year), Bank Indonesia's inflation estimate of below 0.5 percent can be considered rather low.

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The DBS Bank expects that Indonesia's inflation rate will reach 8.2 percent (year-on-year) by the end of 2013, supported by a low monthly inflation rate in the last month of the year. The DBS Bank believes that the pace of inflation in December 2013 will be slightly higher than the country's November inflation (0.12 percent). In the period January to November 2013, inflation in Southeast Asia's largest economy has accumulated to 7.79 percent (yoy). The bank also stated that it expects inflation to reach 6.7 percent in full-year 2014.

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Deputy Trade Minister Bayu Krisnamurthi said that the Indonesian government is preparing two strategic steps to anticipate the negative impact of the winding down of the Federal Reserve's quantitative easing program. In January 2014, the Fed's bond-buying program will be reduced from USD $85 billion to USD $75 billion per month. The two strategic steps, which will enhance financial stability in Southeast Asia's largest economy, involve the curtailing of Indonesia's current account deficit and high inflation.

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Indonesia's Finance Minister Chatib Basri expects that Indonesia's economic growth in 2013 will reach 5.7 percent, significantly below the government's initial target of 6.3 percent. Basri announced his expectation at the government's economic evaluation and projection meeting. According to Basri, Indonesia's economic growth is stable, despite its slowing trend. Among the G20 member countries, only China will post higher GDP growth (7.8 percent up to the third quarter). Indonesia's inflation rate is expected to reach 8.5 percent (yoy) at the year-end.

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The first day of the month - in case of a working day - implies that investors can count on the release of several macroeconomic data from Indonesia, specifically inflation and manufacturing activity. Statistics Indonesia (BPS) announced this morning (01/06) that Indonesia's consumer inflation reached 0.24 percent (m/m), or 3.33 percent (y/y), in May 2016. Meanwhile, the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) eased to a reading of 50.6 in May from 50.9 one month earlier. Lets take a closer look at these data.

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The central bank of Indonesia (Bank Indonesia) expects to see deflation in April 2016 on the back of controlled food prices as the harvest season has arrived. Bank Indonesia Governor Agus Martowardojo said a central bank survey shows deflation of 0.33 percent month-to-month (m/m) during the first three weeks of April. Besides lower food prices, Martowardojo also attributes April deflation to the government's decision to cut fuel prices (premium gasoline and diesel) by IDR 500 (approx. USD $0.04) per liter per 1 April. This move led to a 4 percent drop in public transportation tariffs.

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The central bank of Indonesia (Bank Indonesia) announced on Friday (15/04) it will adopt a new monetary tool per 19 August 2016 that is to replace the existing BI rate which is considered too inefficient to influence market liquidity as it is not directly tied to Indonesia's money markets. The seven-day reverse repurchase rate (reverse repo), which stood at 5.50 percent in the central bank's last auction, is to become the nation's new benchmark. Bank Indonesia Governor Agus Martowardojo, who communicated through a teleconference from Washington DC, emphasized that the central bank will not change its monetary stance.

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To assess Indonesia's purchasing power and consumer confidence it is always useful to take a look at car and motorcycle sales because when people are confident about their financial situation and have enough money to spend then they tend to buy cars and motorcycles (motorcycles are particularly popular among Indonesia's huge middle to lower-middle class segment). Meanwhile, cement sales inform about property and infrastructure development. Property development is also closely related to purchasing power and consumer confidence because property development grows when people's demand for property rises.

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The central bank of Indonesia (Bank Indonesia) expects to see deflation at 0.15 percent month-to-month (m/m) in February 2016. Bank Indonesia Governor Agus Martowardojo said lower (government) administered prices in combination with low core inflation will be the recipe for deflation in the second month of the year. The lower administered prices that are primarily the cause of deflation consist of fuel prices, air fares and 12-kilogram liquefied petroleum gas (LPG) canisters. In the first month of the year Indonesian inflation accelerated to 4.14 percent (y/y).

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Tomorrow (05/02), Statistics Indonesia is scheduled to release Indonesia's official full-year 2015 economic growth figure. Nearly all analysts expect to see a figure that reflects the continuation of slowing economic growth. Southeast Asia's largest economy expanded 5.0 percent in 2014 and this is expected to have eased further to 4.7 percent or 4.8 percent in 2015 on the back of (interrelated) sluggish global growth, low commodity prices, and weak export performance. Domestically, Indonesia has or had to cope with high interest rates and inflation (hence curtailing people's purchasing power and consumption as well as business expansion).

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New York-based financial services firm Standard & Poor's stated that Indonesia's banking industry will feel the negative impact of Indonesia's sluggish economic growth in combination with persistently low commodity prices next year. This combination may weaken profitability of the nation's banking industry. S&P puts Indonesia's economic growth in 2016 at 5 percent (y/y), below the International Monetary Fund's and World Bank's forecast as well as the central government's target, all at 5.3 percent (y/y).

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Hari ini, Bank Dunia menerbitkan edisi terbaru dari publikasi andalannya Indonesia Economic Quarterly berjudul “Reformasi di Tengah Ketidakpastian". Dalam edisi ini, lembaga yang bermarkas di Washington ini menyatakan bahwa kondisi global masih tetap tidak menguntungkan meskipun kondisi pasar keuangan telah stabil sejak Oktober. Sementara itu, Indonesia terkena dampak negatif dari kebakaran hutan dan kabut asap beracun akibat perbuatan manusia yang merugikan Indonesia kira-kira Rp 221 triliun (atau 1,9% dari produk domestik bruto negara ini) dalam waktu lima bulan.

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After having experienced two consecutive months of deflation in September and October, Indonesia is expected to see inflation again in November, primarily on higher food prices (chicken meat and rice). Agus Martowardojo, Governor of Bank Indonesia, expects an inflation rate of 0.2 percent (month-on-month) in November. This would mean that inflation in full-year 2015 is likely to reach 3 percent (y/y), in line with earlier estimates and within - or perhaps slightly below - Bank Indonesia's target range of 3 - 5 percent (y/y) of inflation in 2015.

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The central bank of Indonesia (Bank Indonesia) is expected to keep its benchmark interest rate (BI rate) relatively high in order to safeguard Indonesia's financial stability in 2016 (instead of seeking accelerated economic growth through a rate cut). Despite easing pressures on inflation and the country's current account balance, Bank Indonesia Governor Agus Martowardojo said that persistent global uncertainty (referring to the looming US Fed Fund Rate hike and China's slowdown) justifies the tight monetary stance.

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