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Asia: Indonesian Inflation Hit 6%, One Of The Drivers Was The Increased Price Of Fuel

Asia: Indonesian Inflation Hit 6%, One Of The Drivers Was The Increased Price Of Fuel| FXMAG.COM
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Table of contents

  1. CPI year-on-year growth
    1. September inflation at 6% after fuel price hike
      1. Core inflation settles at 3.2%
        1. Headline inflation now at multi-year high
          1. BI still likely to retain hawkish tone
            1. Core inflation expected to rise further as second-round effects manifest

              Headline inflation rises as Pertalite price increase kicks in

              asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 1asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 1
              Inflation in Indonesia has remained subdued
              6.0%

              CPI year-on-year growth

               

              As expected

              September inflation at 6% after fuel price hike

              Price pressures continue to build in Indonesia. September CPI inflation rose 6% year-on-year and 1.2% month-on-month after the government increased the price of subsidised fuel. As a result of the price increase for Pertalite, transport costs increased 8.9% for the month. Meanwhile, food inflation also accelerated to 7.9% while only clothing and financial services saw slower inflation from the previous month.   

              Core inflation settles at 3.2%

              The surprise today was the core inflation reading which increased to 3.2% YoY from 3.0%. The market consensus had core inflation rising to 3.5% as economic activity continued to improve. 

              Despite the downside surprise, we believe core inflation should continue to accelerate for the rest of the year as second-round effects from the recent fuel price hike begin to manifest. Furthermore, improved economic growth prospects suggest demand-side pressures are likely to build, putting pressure on core inflation to rise further.

              Headline inflation now at multi-year high

              asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 2asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 2
              Source: Badan Pusat Statistik and Bank Indonesia

              BI still likely to retain hawkish tone

              Bank Indonesia (BI) announced two successive surprises in the last three months; the first of which was an unexpected rate hike at the August meeting followed by a hefty 50bp rate increase when the market had priced in a more modest one. 

              With inflation now hitting multi-year highs, we expect BI to retain its hawkish tone with a rate hike at the October meeting still a possibility. The core inflation number however could mean that BI would be under less pressure to deliver another punchy (50bp) rate increase with the size of the hike likely dependent on the rupiah's performance for the month.     

              Core inflation expected to rise further as second-round effects manifest

              asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 3asia indonesian inflation hit 6 one of the drivers was the increased price of fuel grafika numer 3
              Source: Badan Pusat Statistik
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              Tags
              Indonesian CPI IDR Bank Indonesia

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              This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more


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