Deflation in August was attributable to Lowered Commodity Prices - Photo by Statistic Indonesia

JAKARTA (TheInsiderStories) – Indonesian Statistics recorded the country’s  inflation rate increased in January by 3.25 percent year-on-year (YoY), mainly on higher demand for basic food commodities during the early days of the month, which may indicate rising confidence among households.

The inflation rate for calendar year in January 2018 stood at 0.62 per cent from previous month, the statistics agency said.

During the first month, consumer prices of food prices rose 2.34  per cent  yoy, processed food, beverages, cigarettes and tobacco increased by 0.43 per cent; housing, water, electricity, gas and fuel was up 0.23 per cent; clothing group increased by 0.50 per cent; health group rose by 0.28 per cent; and the education, recreation and sports group edged up by 0.16 per cent.

Meanwhile the core inflation rate of the calendar year in January 2018 rose 0.31 per cent and the year-on-year core inflation rate (January 2018 to January 2017) of 2.69 per cent.

Bank Indonesia has forecast a headline inflation rate of between 2.5 per cent to 4.5 per cent in 2018, while the government set inflation target of 3.5 per cent. Last year, the country’s full year inflation reached  3.61 per cent, below the government inflation target for the whole year at 4.3 per cent.

Bank Indonesia has lowered its benchmark policy rate, BI 7-Days Repo Rate in 2017 to 4.25 per cent. In mid-January, the central bank has also decided to keep the BI 7-Days Repo Rate. Bank Indonesia has said one of its focus this year is to maintain lower inflation rate.

Most economists have also projected a relatively stagnant inflation in 2018 as they see no factors that could the inflation to spike this year. DBS economist Gundy Cahyadi projected Indonesia’s inflation rate to hit 4.0 per cent and 4.5 per cent in 2018 and 2019, respectively, up from its forecast of 3.9 per cent for 2017.