Last month we stated that Indonesia’s central bank (Bank Indonesia) might just be at the start of a (prolonged) monetary tightening cycle. After all, higher interest rates is what we see happening across the world; a development that is led by the Federal Reserve (Fed) that has been aggressively raising its benchmark interest rate to fight inflation. This then causes capital outflows from most other parts of the world.

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In line with expectations, Indonesian inflation accelerated well beyond 1.0 percent month-on-month (m/m) in September 2022 after the government raised prices of subsidized fuels (Pertalite, Pertamax and diesel oil) on 3 September 2022.

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On 6 October 2022 Indonesia Investments released the September 2022 edition of its monthly report. In this report we analyze the latest (and most relevant) economic, political, and social news from Indonesia.

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Contrary to our expectations, Indonesia’s headline inflation showed some relatively steep deflation in August 2022. This was a sort of relief as we had seen five straight months of rapidly rising inflation in Indonesia between March and July 2022.

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On 6 September 2022 Indonesia Investments released the August 2022 edition of its monthly report. In this report we analyze the latest (and most relevant) economic, political and social news from Indonesia.

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In line with our expectations, Indonesia’s headline inflation rate approached the 5.0 percent year-on-year (y/y) mark in July 2022 as Indonesia’s Statistical Office (BPS) determined inflation at 0.64 percent month-on-month (m/m) in July 2022.

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On 4 August 2022 Indonesia Investments released the July 2022 edition of its monthly report. In this report we analyze the latest (and most relevant) economic, political and social news from Indonesia.

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At its latest monetary policy meeting, held on 18-19 April 2022, Bank Indonesia decided to leave its interest rates unchanged in an effort to facilitate the ongoing economic rebound. The benchmark interest rate (the BI 7-day reverse repo rate) was maintained at 3.50 percent, while the deposit facility and lending facility rates were kept at 2.75 percent and 4.25 percent, respectively.

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Indonesian markets are back open after the week-long Idul Fitri holiday. And, it was not the greatest opening, with Indonesian stocks, bonds, and the rupiah under heavy pressure. Moreover, Indonesian inflation accelerated quite rapidly in April 2022.

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Last month we started our inflation update stating that “the global threat of inflation has not reached Indonesia yet”. One month later, it now seems that a high inflation cycle has arrived in Indonesia; one that may continue in the next couple of months.

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After continuously reaching new record-high levels last week, the Indonesia Stock Exchange (IHSG) finally had to give up some of its gain and closed 1.04 percent lower. Declining Asian stock markets (excluding Japan's main index) and fears that the IHSG had already reached a (too) high level impacted on today's result. Market participants, who recently confirmed good corporate annual results of many companies by buying, now engaged in profit taking.

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Apparently, yesterday's decline was only a small stumbling block for the Indonesia Stock Exchange (IHSG). Indonesia's main indicator rebounded strongly after feeling the effects of stronger American stock indices that were positively influenced by a rise in Housing Index and Consumer Confidence. Moreover, the IHSG accelerated its gain after Asian stock markets and the opening of Europe's stock indices were positive.

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