Indonesia recorded its first positive headline inflation in 2025 in March. Recorded at 1,03% (yoy), headline inflation increased from -0,09% (yoy) in the previous month. The return of inflation to positive territory largely reflects the end of the 50% electricity tariff discount that took place from January to February 2025. Inflation is predicted to increase slowly along with the end of various electricity tariff and air transportation subsidy schemes for the Eid al-Fitr period. Increased aggregate demand and public mobility following various religious holidays and joint leave periods also have the potential to put pressure on inflation. On the other hand, the aggressive escalation of the 'tit-for-tat' or tit-for-tat strategy between the US and China has further exacerbated global uncertainty. In the last 30 days, accumulated capital outflows from Indonesia reached USD1,99 billion and the Rupiah depreciated by 2,59%. Given these conditions, BI should hold its benchmark interest rate at 5,75% at the Board of Governors Meeting in April 2025 and maintain its focus on intervention efforts to maintain exchange rate stability.
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