Indonesia Inflation Update: Consumer Price Index Moving Sideways
The inflation rate of Indonesia rose slightly in November 2013 (month-to-month) and confirms estimations that inflation in Southeast Asia's largest economy is under control after having accelerated sharply due to the introduction of higher subsidized fuel prices June 2013. In recent months, inflation moved sideways and is expected to ease considerably in the first quarter of 2014. Indonesia's consumer price index rose 0.12 percent in November due to rising electricity, processed foods and health care costs.
On Monday (02/12), Statistics Indonesia (BPS) announced that Indonesia's annual inflation rose slightly to 8.37 percent (year-on-year), from 8.32 percent in October 2013.
| 2013 | Inflation |
| January | 1.03% |
| February | 0.75% |
| March | 0.63% |
| April | -0.10% |
| May | -0.03% |
| June | 1.03% |
| July | 3.29% |
| August | 1.12% |
| September | -0.35% |
| October | 0.09% |
| November | 0.12% |
| Total | 7.79% |
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Inflation (annual percent change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 7.9¹ |
¹ Year to date (January-November 2013)
Source: Statistics Indonesia
Because Indonesia's inflation is stable, it is expected that Bank Indonesia (Indonesia's central bank) will not raise its benchmark interest rate (BI rate) again in 2013. Between June and November 2013, Bank Indonesia gradually raised the BI rate from 5.75 percent to 7.50 percent in order to combat high inflation and limit imports, thus improving the current account balance as well as the Indonesian rupiah exchange rate, which has depreciated sharply against the US dollar. However, in anticipation of the winding down of the Federal Reserve's quantitative easing program, Bank Indonesia may raise its BI rate in the first quarter of 2014.
By the end of the year, inflation is expected to reach 8.5 percent, significantly lower than the assumptions of the Indonesian government and Bank Indonesia. Both institutions had revised up their forecasts for inflation after the fuel price hike to between 9.0 and 9.8 percent.
Further Reading:
• Inflation in Indonesia
• Analysis of Indonesia's October Inflation and September Trade Deficit
• Indonesia's October 2013 Trade Surplus Provides a Glimmer of Hope