Indonesia: Inflation surprised to the downside in October – UOB

Economist at UOB Group Enrico Tanuwidjaja comments on the recent release of inflation figures in Indonesia.

Key Takeaways

“Indonesia’s headline inflation rate decelerated to 5.7% y/y in Oct from 6% in Sep (market expectation was also at 6% for Oct).”

“Adjustment of higher fuel prices has and will continue to result in higher transportation prices and subsequently, the second-round impact on broader consumption basket such as food and other services. This will mean that inflation would stay elevated in the months ahead.”

“However, we revise our 2022 average inflation forecast slightly lower to 4.4% from 4.9% previously on account of a slower secondary impact from fuel price adjustments onto other parts of the CPI basket. We continue to expect inflation to grind slightly lower to average 4% next year. Nevertheless, on the back of still-elevated inflation and its expectations, we keep our forecast for BI to continue hiking to reach 5.75% in 1Q23.”