Inflation Continues to Pick Up In October

Economic Research	2 November 2016
Indonesia
Economic Highlights
Inflation Continues to Pick Up In October The headline inflation increased to 3.3% y-o-y in October, up from +3.1% in September, contributed by the faster increase in prices of raw food products and costs of housing & utilities. Overall, we expect the headline inflation to moderate to 3.4% in 2016, from +6.4% in 2015, on account of low crude oil prices and relatively soft economic growth. For 2017, we expect inflation to pick up slightly to 3.8%, on account of planned electricity tariff hike and a modest pick-up in volatile food prices. As the inflation will likely continue to be subdued, we expect Bank Indonesia to maintain its loose monetary and macroprudential policy. For the rest of the year, we envisage Bank Indonesia (BI) to retain its policy rate unchanged at the current level. Further out, however, we expect the BI to slash its key policy rate by another 25 basis points in 2017 to support economic growth. Economist:  Rizki Fajar| +6221 2970 7065
To access our recent reports please click on the links below: 01 Nov: Money Supply and Loan Growth Continue to Decelerate in September 21 Oct: BI Unexpectedly Cuts The Key Rate to 4.75% 18 Oct: Exports Continues to Recover while Imports Fall Deeper in September 04 Oct: Money Supply and Loan Growth Decelerate in August 04 Oct: Inflation Picks Up Slightly In September 23 Sep: BI Cuts The Key Rate to 5.00%