Indonesia's inflation rate in June was 1.03 percent, a significant rise compared to the previous month (deflation of 0.03 percent). Although the government's decision to increase the price of subsidized fuel in the second half of June 2013 already made an impact on the country's inflation rate, it is expected that in the next two months inflation will peak over two percent. Apart from the fuel price, other factors that will cause high inflation are the start of the holy fasting month (Ramadan), the new school year and the higher electricity rate.

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Indonesia's June inflation rate was recorded at 1.03%. Components that contributed most to this increase were food (including instant foods), drinks, tobacco and housing (gas, water and electricity). The government's decision to raise the price of subsidized fuel last month already made an impact but it is expected that this impact will be heavier in the months ahead when more prices are revised upwards. On 22 June, prices of subsidized gasoline were raised by 44%, while prices of subsidized diesel were raised by 22%.

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Indonesia's inflation rate is expected to exceed one percent in June 2013 as a result of the increase in price of subsidized fuel that was implemented last week. Throughout Indonesian society, prices have been revised upward to cover for the increased fuel costs. These first round effects may still be felt in July, when inflation is expected to peak at two percent as the fasting month (Ramadhan) and the new school season will start. Second round effects may continue for another five months.

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Both Industry minister M.S. Hidayat and Economic minister Hatta Rajasa confirmed that on Friday (21/06) the government will announce the increase in price of subsidized fuel after it had already been approved by the House of Representatives (DPR) last Monday (17/06). Immediately after the announcement, the price of fuel is set to be raised. It has been reported that the government's announcement will be revealed at midnight, implying that the price hike is effective starting from Saturday.

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After a long plenary session on Monday (17/06), Indonesia's House of Representatives (DPR) and the government have agreed to the revised 2013 State Budget (APBN-P). The revision was needed as original macroeconomic assumptions began to fall out of tune with reality. Due to global and domestic conditions a number of assumptions needed to revised down. Most controversial decision that was taken is the increase in price of subsidized fuel by 44 percent to IDR 6,500 (USD $0.66) per liter.

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Late on Monday evening (17/06), the increase in the price of subsidized fuel, as stated in Law No. 19/2012, was approved by Indonesia's House of Representatives (DPR) through a voting session as political parties could not agree collectively on the price hike as well as on cash programs for the poor to mitigate effects of the higher fuel price. Demonstrations against the price hike were staged in various regions. In Medan (North Sumatra), Jambi (Central Sumatra) and Ternate (North Moluccas), it led to clashes between the police force and protestors.

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The plenary session of Indonesia's House of Representatives (DPR) is still ongoing as the various political parties could not agree yet on the increase in the price of subsidized fuel. Five political parties agree to the price hike, while four others have rejected it. If the political parties can not agree to the proposal, then it will be decided by individual voting starting from midnight (Indonesian time). The price hike has been long awaited as a measure to relieve pressure on Indonesia's budget deficit.

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Today (15/06), it was reported in Indonesia's media that the government will announce details regarding the new price of subsidized fuel on Monday (17/06) after a plenary session of the House of Representatives (DPR). The Union of Indonesian Workers (Konfederasi Serikat Pekerja Seluruh Indonesia) has announced that it will stage a large demonstration on 17 or 18 June at the DPR/MPR building (the seat of the government) in Indonesia's capital city as well as smaller demonstrations in various cities across the archipelago.

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The central bank of Indonesia (Bank Indonesia) decided today to raise its benchmark interest rate by 25 basis points to 6.0 percent. The decision was made amid concerns about the inflationary impact of a hike in subsidized fuel prices (planned this June) as well as increasing uncertainty in global financial markets as central banks' may scale back stimulus programs. The Indonesian rupiah has weakened considerably in 2013 and forms the worst performer in Asia after the Japanese yen among the 11 most-traded currencies tracked by Bloomberg.

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To ease pressures on the IDR rupiah, Indonesia's central bank has used about USD $2.0 billion of its foreign exchange reserves to support the currency as the country's continuing trade deficit as well as concerns about the possible increase in price of subsidized fuel in June has caused much uncertainty about the level of inflation in the near future and puts downward pressure on the rupiah. Indonesia's foreign exchange reserves fell to USD $105.2 billion in late May 2013 from USD $107.3 billion at the end of April.

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The central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (seven-day reverse repo rate) at 4.75 percent at the April policy meeting (19-20 April 2017), while its deposit facility rate and lending facility rate stayed at 4.00 percent and 5.50 percent, respectively. Bank Indonesia considers the current interest rate environment appropriate to face global uncertainties as well as rising inflationary pressures at home.

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The central bank of Indonesia (Bank Indonesia) said it carefully monitors the impact of higher electricity tariffs on the nation's inflation pace in March 2017. This month the government implemented the second phase of its gradual electricity tariff increase program for 900-VA household customers. Indonesia's state-owned electricity company Perusahaan Listrik Negara (PLN) decided to raise the electricity price for 900-VA households three times this year in order to cut energy subsidies and ensure that these subsidies are indeed channeled to the right people.

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The Bank of Indonesia recently resorted to a sudden cut in interest rate (by 25 bps to 4.75 percent) at its 20th October 2016 meeting. This followed a 25 bps reduction in September and thus this is the sixth time this year that the Indonesian central bank has elected to loosen monetary policy.

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An International Monetary Fund (IMF) team, led by Luis E. Breuer, visited Indonesia between 7 and 18 November 2016 to conduct the annual Article IV Consultation. The IMF team exchanged views with Indonesian government officials, Indonesia's central bank (Bank Indonesia), and other public agencies, as well as representatives of the private sector, academics, and students on recent economic and financial market developments and the near-to-medium-term economic outlook.

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The central bank of Indonesia (Bank Indonesia) has become slightly less optimistic about Indonesia's economic growth in the third quarter of 2016. Bank Indonesia revised down its growth projection to below the 5 percent (y/y) mark for Q3-2016 (from an earlier forecast of 5.2 percent). However, the lender of last resort still expects to see a better performance compared to the 4.73 percent (y/y) pace posted in Q3-2015. Meanwhile, low inflation and a strong rupiah could result in another interest rate cut in Southeast Asia's largest economy.

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On September 22, 2016, the central bank of Indonesia (Bank Indonesia) decided to cut its BI seven-day repo rate from 5.25 percent to 5.00 percent, and this has changed parts of the long-term outlook for investors. Bank Indonesia also reduced its lending rate to 5.75 percent (from previous 5.50 percent), and the deposit rate to 4.50 percent (from previous 4.75 percent previously). This is significant because it shows that lending rates and interest rates have dropped to multi-year lows with the current policy changes.

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In line with expectations, Indonesia's inflation rate eased to 2.79 percent year-on-year (y/y) in August 2016, from 3.21 percent (y/y) in the preceding month. Consumer price inflation in Indonesia fell on the back of declining prices after the Islamic celebrations of Ramadan and Idul Fitri ended in July. On a monthly basis, Indonesia recorded deflation of 0.02 percent (m/m) in August. Meanwhile, the manufacturing sector of Indonesia turned positive again.

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Gold investment levels in Asia continue to hold close to their all-time highs, and many regional investors are asking questions about what is next for the bullish trend in precious metals. To answer this question, it is important to take another look at old-fashioned economics as a means for determining how price valuations are likely to unfold in the future. One of the most critical economic forces in these areas is the force of market inflation, and its influence on the yellow metal can be significant depending on the underlying fundamentals present in the global economy.

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The central bank of Indonesia (Bank Indonesia) expects Indonesia's inflation to reach slightly below 1 percent month-to-month (m/m) in July 2016. According to central bank surveys, Indonesia's inflation accelerated in the first and second week of July by 1.18 percent (m/m) and 1.25 percent (m/m), respectively. Juda Agung, Executive Director of Bank Indonesia's Economic and Monetary Policy Department, said inflation tends to peak ahead of - and during - the Idul Fitri holiday (4-8 July) but is set to ease in the third and fourth week.

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Next week Indonesia's financial and stock markets are closed for Idul Fitri (also known as Lebaran or Eid al-Fitr), the celebrations that mark the end of the holy Islamic fasting month (Ramadan). As usual, during the Ramadan month (that started in early June) business activities in Indonesia start to slow and this slowdown will reach its "peak" during the Idul Fitri holiday, a national holiday (from Monday 4 July to Friday 8 July) when some 17.6 million Indonesians who live and work in the bigger cities will return to their places of origin for a couple of days (a tradition called mudik).

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