Indonesia’s Inflation Beats Highest Forecast in Challenge to Rate Outlook

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Indonesia’s inflation surprised on the upside in December, challenging the central bank and market’s view that price pressures were well on the wane.

Consumer prices rose 5.51% from a year ago, driven by higher costs of gasoline, household fuels, air freight rates and transport fares, the nation’s statistics agency said on Monday. That beats even the highest forecast in a Bloomberg survey of economists, which ranged from 5.18%-5.47%.

Core inflation, which strips out the impact of government-administered and volatile food items, rose 3.36%, in line with the 3.39% market consensus.

Smaller Rate Hikes in Play as Indonesia Turns Eye to Growth

Bank Indonesia slowed down its tightening pace in December, raising its key rate by a quarter-point after three consecutive months of half-point moves, as it expected inflationary pressures to wane. The monetary authority saw consumer-price increases decelerating to 5.4% by year-end.

–With assistance from Tomoko Sato.