Consumer Price Index of Indonesia: Inflationary Pressures Rising, Do We Need to Brace for Impact?

Whereas it was anticipated that Indonesian belongings could be below stress as a consequence of fairly aggressive financial tightening in the US (the place the Federal Reserve – consistent with market expectations – raised its benchmark rate of interest by 0.50 % after concluding its coverage assembly on 4 Could 2022), it was a little bit of a shock for us to see Indonesian inflation accelerating at a considerably quicker tempo than beforehand anticipated.

Primarily based on the most recent knowledge from Indonesia’s Statistical Company (Badan Pusat Statistik, or BPS), launched on 9 Could 2022, Indonesian inflation was recorded at 0.95 % month-on-month (m/m) in April 2022, implying that the year-on-year (y/y) determine rose to three.47 %. Primarily based on a central financial institution (Financial institution Indonesia) survey performed within the third week of April 2022, we had anticipated that the annual inflation determine could be round 3.20 % (y/y) in April 2022.

The primary query now could be: will Indonesian inflation ease ranging from Could 2022 because the influence from the Ramadan-Idul Fitri interval and the influence from the value-added tax hike wane (implying that we’re coping with non permanent pressures solely), or, are these latest inflationary pressures additionally closely influenced by imported inflation? If these inflationary pressures significantly originate from overseas, then we would want to attribute this to the Russo-Ukrainian struggle. This struggle pushed vitality costs to multi-year highs, and contemplating vitality is a vital ‘ingredient’ for manufacturing, it causes value pressures of all the things that’s produced (and imported into Indonesia).

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