● Indonesia’s headline inflation edged down to a six month low, below market expectation (3.13% YoY; consensus: 3.29%; Sep: 3.39%), but well within Bank Indonesia’s (BI) inflation target range of 2.5-4.5%.

- MoM: the index rebounded by a marginal (0.02%; Sep: -0.27%).

- Ytd: inflation moderated slightly versus the preceding year (3.1%; Jan-Oct: 3.2%).

- Core inflation: slowed to a 3-month low (3.2% YoY; Sep: 3.3%).

● Main cause for the moderation was associated to subdued food prices, housing, electricity, gas and fuel as well as transportation, communication & finance.

- Food: recorded a slower pace (4.8%; Sep: 5.4%) due to weak prices of spices and fresh fish, though the index was pushed by higher prices of meat and meat products.

- Housing, electricity, gas and fuel: moderated to a 16-month low (1.9%; Sep: 2.3%).

- Transportation, communication & finance: edged down to its lowest level in 20-month (1.5%; Sep: 1.9%).

● Benign inflation trend across advanced and developing economies.

- US: PCE prices continued to undershoot the Fed's 2.0% target (1.7% YoY; Aug: 1.8%).

- Eurozone: Flash estimate reported a further moderation in October (0.7% YoY; Sep: 0.8%), a sign of economic weakness and increasing concerns by the ECB.

- Thailand: Inflation moderated to a 2-year low (0.11% YoY; Sep: 0.32%) below market expectation.

● 2019 CPI forecast maintained at 3.1% (consensus: 3.2%; YTD: 3.1%; 2018: 3.2%), potentially hint to another rate cut by Bank Indonesia.

- Inflation is expected to remain subdued for the remaining months though holiday celebration (Christmas and New Year) may lift inflationary pressure but would be contained by low oil prices going forward.

- External sector particularly the prolonged trade feud as well as growth slowdown among the major economies to weighed on domestic growth.

Source: Kenanga Research - 4 Nov 2019