In November, the inflation pressure was skyrocketing. The MoM inflation rate reached 1.50 percent, after accelerated by 0.47 percent in the previous month. On a yearly basis, the YoY inflation rate jumped from 4.83 percent to 6.23 percent. And cumulatively, in the January-November period, headline inflation reached 5.75 percent, remain lower than last year’s 7.60 percent.
All CPI components rose in November. The transportation components (+4.29 percent) and the foodstuff components (+2.15 percent) had the biggest MoM increase. The other components also surged: the prepared food component rose 0.71 percent, the housing component hiked 0.49 percent, the medical care component climbed 0.43 percent, the education components slightly up by 0.08 percent. Meanwhile, the clothing components fell by 0.08 percent.
In November, increasing prices pressure mostly driven by the government’s decision to hike subsidized fuel prices, given the lack of seasonality event. However, the price of several types of commodities had headed higher in advance, before the announcement of subsidized fuel price hike, forming expectation on higher price pressure.
We believe that the full impact of government policy will be seen in December inflation figure. Moreover, the seasonal impact from the beginning of the planting season and holiday season also put additional pressure. Higher demand for basic foodstuffs and prepared food due to Christmas and the New Year holiday event typically, will push those prices increase.
Against this backdrop, we predict inflation of 1.68 percent MoM in December, translating into YoY inflation of 7.53 percent.
In their latest meeting, Bank Indonesia maintained the BI rate at 7.75 percent, with the Lending Facility increased to 8.00 percent and the Deposit Facility rate kept unchanged at 5.75 percent. In the short tem, we predict that the benchmark rate will stay at its current level.