Indonesia: Inflation pressures from Oil and festivals – DBS

DBS Group Research expects Indonesia’s March CPI inflation to stay firm at 4% year-on-year, slightly below February’s 4.8%, but with a faster monthly pace. Analysts highlight the impact of higher energy prices and festive demand, as well as base effects. Policy options include holding retail fuel prices via budget savings, though prolonged conflict could force price hikes or subsidy cuts.

CPI seen firm on energy and holidays

"March inflation is expected to remain firm at 4% yoy, compared to 4.8% in the previous month, with a faster month-on-month pace than earlier averages, reflecting the initial impact of elevated energy prices and festival-driven price pressures."

"Base effects will also keep the trend firm."

"The most immediate line of defence would likely be to keep retail fuel prices unchanged, using budgetary savings to offset the higher costs."

"However, if the conflict persists and fuel prices remain elevated into the second quarter, the likelihood of price increases or subsidy reductions will rise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)