Live Chat Software
Berita Dan Riset Terbaru
CPI & SBI Outlook
CPI & SBI Outlook January 2016
January 27, 2016 10:05

In December 2015, inflation reached 0.96 percent on a monthly comparison. This translated into 3.35 percent on an annual basis. By component, inflation was highest in the foodstuffs component at 1.97 percent MoM, while the nonfoodstuffs component posted a more moderate increase of 0.33 percent MoM. ?? Seasonal factors (the beginning of the planting season and the year-end holidays) created additional inflationary pressures in December. All 7 components of the CPI posted increases in December. The foodstuffs and prepared foods components rose the most: up by 3.20 percent and 0.50 percent, respectively. Among the other components, the transportation component climbed 0.45 percent, followed by the housing component (+0.40 percent MoM), the medical care component (+0.24 percent MoM), the clothing component (+0.09 percent MoM), and the education component (+0.06 percent MoM).

In early 2016, the government announced new electricity tariffs and cut the prices of several fuel products. Non-subsidized electricity tariffs were reduced by around 8 percent (weighted average). Moreover, in response to the slump in global crude oil prices, the government also cut the retail prices of several fuel products (by between 1.7 and 15.7 percent) and lowered the price of nonsubsidized LPG (by around 4.4 percent). 

In January 2016, the monthly inflation rate will remain high due to seasonal factors. However, we believe that the inflationary pressures may be less than usual (typically monthly inflation is around 1 percent in January). But the prices of basic foodstuffs are still likely to post significant increases due to tighter supply. By contrast, although the government’s recent cuts in fuel prices will help to dampen inflationary pressures, transportation costs may not change much over the short term.

For January 2016, we forecast inflation of 0.68 percent MoM, translating into YoY inflation of 4.30 percent. ??

At its latest meeting, Bank Indonesia lowered the BI rate to 7.25 percent, with the Lending Facility and the Deposit Facility rate cut to 7.75 percent and 5.25 percent, respectively. This policy takes into consideration the stable outlook for inflation over the near term, possibly weak economic growth, and expectations of a more manageable CAD. In February 2016, we don’t expect BI to lower rates further since: 1) the trade deficit may widen the Q4 2015 CAD, 2) the monthly inflation rate will be higher in January 2016, and 3) rupiah volatility remains high.