Indonesia’s inflation rose 1.5% YoY in November, vs 1.7% the month before. The year-to-date average stands at 2.4% YoY vs 3.8% in the comparable period a year ago. Despite a small uptick in core inflation to 2.3%, there was a broad-based slowdown amongst the sub-categories. Energy and volatile (supply-side driven) inflation declined -0.3% YoY and -0.8% YoY, respectively, signalling tepid cost push pressures. Administered inflation was also modest at 0.8% YoY. Certain food types including chilli peppers, shallots etc. added to the headline. The demand-side impulse was also modest, posing little risk to the inflation outlook given the slack in the economy. A final word on the VAT increase for 2025 is still pending. Official commentary alluded to a plan to reassess the fuel subsidy program by lowering energy subsidies, and instead, provide cash handouts to needy households. This measure is estimated to amount to ~IDR 200trn savings to the coffers and be more effective in supporting demand. To lift consumption, the national minimum wage is poised to be increased by an aggregate 6.5% in 2025 vs 3.4% in 2024, providing relief to households. Overall, the current inflation run rate is close to our expectations, with another sub-2% inflation print in Dec to see the full year average at 2.3% YoY, within the BI target. Onshore liquidity has meanwhile received a hand from a pickup in realized government spending. While these developments tick the box for the BI to retain a dovish bent, weakness in the currency is a bigger bother for policymakers, in the face of US-driven uncertainties. Markets await the inauguration of the new US President to gauge the direction on tariffs etc. Given this mix, we expect BI to err on the side of caution and keep the benchmark rate on hold this month.
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.