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Indonesia: inflation reaches 5.4% year-on-year, 0.3% less than in October

Indonesia: inflation reaches 5.4% year-on-year, 0.3% less than in October| FXMAG.COM
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Table of contents

  1. November headline inflation
    1. Headline inflation dips to 5.4%
      1. Indonesia inflation slips below expectations but don't expect BI to pause just yet
        1. BI likely still hawkish to close out the year

          November inflation slipped to 5.4% year-on-year, slightly below market expectations

          indonesia inflation reaches 5 4 year on year 0 3 less than in october grafika numer 1indonesia inflation reaches 5 4 year on year 0 3 less than in october grafika numer 1
          Source: Stenly Lam
          5.4%

          November headline inflation

          (year-on-year)

          Lower than expected

          Headline inflation dips to 5.4%

          November inflation edged lower to 5.4% year-on-year, down from the previous month’s reading of 5.7% and slightly slower than market expectations. Meanwhile, core inflation was steady at 3.3% when market participants expected a slight pickup to 3.4%. Slower inflation was noted for the heavyweight food and tobacco subsector, which was up 5.9% (6.8% previous), utilities 3.2% (3.3% previous), household equipment 5.0% (5.1% previous) and restaurants 4.6% (4.7% previous). 

          We had expected price pressures to experience a more pronounced acceleration due to second-round effects from the recent price hike for subsidised fuel but the dip in food prices was enough to weigh on the headline number. 

          Indonesia inflation slips below expectations but don't expect BI to pause just yet

          indonesia inflation reaches 5 4 year on year 0 3 less than in october grafika numer 2indonesia inflation reaches 5 4 year on year 0 3 less than in october grafika numer 2
          Source: Badan Pusat Statistik

          BI likely still hawkish to close out the year

          Bank Indonesia (BI) will still likely retain its hawkish leaning despite the lower-than-expected inflation reading for November. Core inflation was tagged as one of the main factors that would drive any BI policy adjustment and we will need to see this head much lower before BI considers reversing its current hawkish stance. 

          Read next: Hungary: GDP declines by 0.4% in the third quarter. What's behind the drop?| FXMAG.COM

          One other factor that could keep BI on the hiking path would be the Indonesian rupiah, which is still down 8.8% for the year and at the weakest level since 1Q 2020. We expect BI to follow through with a rate hike in December although we could see BI slow its pace of tightening as early as next year.      

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          Tags
          Indonesian CPI IDR Bank Indonesia

          Disclaimer

          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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