Consumer prices index unexpectedly rose to a six-month high of 3.23% y/y in November while core consumer inflation, which strips out the more volatile and state-controlled prices, reached a one-year high of 3.03% y/y in November, suggesting underlying inflation remains despite raising the policy rate by 175bps in 2018.

With inflation climbing towards the central bank’s ceiling target of 4.5%, it is still comfortably within Bank Indonesia’s (BI) 2.5–4.5% target band and overall price pressures remain contained. We maintain our view that BI’s focus will remain on the IDR. Thus, we foresee the recent gains in the currency will be in the hands of BI in the coming policy meeting after its pre-emptive 25bp hike in November.

• Consumer prices index unexpectedly rose to a six-month high of 3.23% y/y in November from 3.16% y/y in October against the consensus at 3.15%. At the same time, core consumer inflation, which strips out the more volatile and statecontrolled prices, reached a one-year high of 3.03% y/y in November from 2.94% y/y in October, suggesting underlying inflation remains despite raising the policy rate by 175bps in 2018.

• The higher inflation in November was due to gains in the prices of transportation, communication & financial services, up 2.62% y/y from 2.14% y/y in October; housing & utilities up 2.47% y/y from 2.35% y/y in October; as well as clothing up 3.11% y/y from 3.03% y/y in October. Meanwhile, food prices rose at a slower pace by 4.25% y/y from 4.38% y/y in October.

• With inflation climbing towards the central bank’s ceiling target of 4.5%, it is still comfortably within Bank Indonesia’s (BI) 2.5–4.5% target band and overall price pressures remain contained. We maintain our view that BI’s focus will remain on the IDR. Thus, we foresee the recent gains in the currency will be in the hands of BI in the coming policy meeting after its pre-emptive 25bp hike in November.

Source: AmInvest Research - 4 Dec 2018