Indonesian headline inflation accelerates in November, BI likely to stand pat in December

Indonesian consumer price inflation accelerated in the month of November. On a year-on-year basis, the headline CPI rose to 3.22 percent, whereas it was up 0.27 percent on a sequential basis. The headline inflation was mainly driven by increased administered prices.

The sequential rise in the inflation was mainly due to increased administered prices, thanks to higher transport fares. The transport component was up 0.72 percent sequentially and the only other major components of the CPI basket that saw a sequential rise in November were healthcare and food prices.

Even if core inflation rose in year-on-year terms in November, the rate of rise in sequential terms decelerated a bit to 0.22 percent sequentially from 0.29 percent in October. In spite of the higher November print, headline inflation has continued to be lower than the midpoint of BI’s target corridor of 2.5 to 4.5 percent since the beginning of the year. Inflation is being suppressed by domestic fuel price caps, noted ANZ in a research report. Nevertheless, the recent fall in oil prices and strength in the IDR signify that headline inflation would have continued to be within the central bank’s target corridor even with a complete benchmarking of domestic prices to global prices.

“With inflationary pressures contained, BI’s focus will remain on the IDR. The recent gains in the IDR suggests BI is likely to stay on hold this month following its preemptive 25bp hike in November”, added ANZ.