Indonesia's consumer price index (CPI) finished the year 2017 at the level of 3.61 percent year-on-year (y/y), slightly higher than analysts' forecasts but well within the government's full-year inflation target of 4.3 percent. Indonesian full-year 2017 inflation was the nation's highest annual inflation since 2014 when inflation surged to 8.36 percent (y/y) due to fuel subsidy reforms.
Indonesia's Statistics Agency (BPS), which released the latest inflation data on Tuesday 2 January 2018, said accelerating inflation in the last month of 2017 was primarily caused by rising demand for food products (such as rice, fresh fish and chicken eggs) amid Christmas and New Year celebrations.
Secondly, transportation was a major contributor of inflation in December. A significant increase in the price of airplane tickets and train tickets triggered accelerating inflation across Southeast Asia's largest economy.
BPS Head Suhariyanto said Indonesia's full-year 2017 inflation was higher than in the previous year. Whereas in 2016 inflation was particularly caused by volatile food prices, inflation in 2017 was mostly triggered by administered price adjustments (higher electricity tariffs and fuel prices).
Indonesia's annual core inflation, which excludes volatile food and administered prices, fell to 2.95 percent (y/y) in December compared with 3.05 percent (y/y) in the preceding month.
For 2018 the central bank of Indonesia (Bank Indonesia) targets inflation in the range of 2.5 - 4.5 percent (y/y). Considering the government said it will not raise fuel prices this year (a populist move ahead of the 2018 and 2019 election years), while it has proved to be carefully monitoring food prices (and acting swiftly to increase supplies in times of high demand), Indonesia's 2018 inflation is also expected to fall in the lower side of the central bank's target range.
Source: Indonesia Matters