Indonesia's Inflation Rate Rises Slightly in March 2016
In line with expectations, Statistics Indonesia (BPS) announced that Indonesia's annual inflation rate only rose modestly in March 2016. The nation's March inflation figure climbed to 4.45 percent year-on-year (y/y) in March from 4.42 percent (y/y) in the preceding month. On a monthly basis, Indonesian inflation accelerated 0.19 percent (m/m) in March. The country's core inflation, which excludes administered and volatile food prices, stood at 3.50 percent, slighly below the average 3.60 percent estimate of analysts.
Suryamin, Head of BPS, said food commodities recorded a 0.69 percentage point inflation rate in March, while clothes recorded a 0.55 percentage point inflation, followed by healthcare at 0.3 percent. Food commodities that caused inflationary pressures included onions, red chilis, cayenne pepper, and garlic.
The central bank of Indonesia (Bank Indonesia) maintains an inflation target range of 3-5 percent (y/y) in 2016. In April we expect to see deflation in Indonesia as the government lowered prices of premium gasoline and diesel fuel (by around 7-9 percent per liter) per 1 April 2016. After April inflationary pressure rise due to end of the harvest season and price pressures related to the Ramadan and Idul Fitri celebrations.
Bank Indonesia cut its benchmark interest rate (BI rate) by a total of 75 basis points in three consecutive policy meetings (January-March) to 6.75 percent. The next policy meeting is scheduled for 20-21 April. However, we expect the central bank to leave its interest rate environment unchanged at this meeting.
Inflation in Indonesia:
| Month | Monthly Growth 2013 |
Monthly Growth 2014 |
Monthly Growth 2015 |
Monthly Growth 2016 |
| January | 1.03% | 1.07% | -0.24% | 0.51% |
| February | 0.75% | 0.26% | -0.36% | -0.09% |
| March | 0.63% | 0.08% | 0.17% | 0.19% |
| 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