Indonesia Inflation Eases in March as Base Effect Fades

By Ying Xian Wong

Indonesia's consumer inflation slowed in March, as a low base effect gradually faded.

Headline inflation was 3.48% in March, decelerating from 4.76% in February, as the impact of electricity tariff discounts in January and February last year waned, the statistics agency said Wednesday.

Price pressures in March were mainly driven by higher utility costs.

Core inflation was 2.52%, compared with 2.63% in the previous month. Year-to-date inflation stood at 0.94%.

The conflict involving U.S. and Israel against Iran continues to unsettle global markets, fueling worries about an economic hit to Asian economies such as Indonesia that are vulnerable to commodity price disruptions.

Rising energy costs are increasing pressure on Indonesia to adjust fuel and electricity prices, though hikes to subsidized fuel are unlikely unless fiscal strains worsen, DBS senior economist Radhika Rao said in a recent note.

Higher fuel and fertilizer costs could push up inflation and food prices, she said. DBS raised its 2026 inflation forecast to 3.2% from 2.8% previously.

Given uncertainty and geopolitical risks, most economists think rate cuts are off the table for the Indonesian central bank. But given the supply-driven nature of the energy shock, Bank Indonesia is likely to resort to rate hikes if the currency weakens sharply or if fuel prices spiral for a sustained amount of time, analysts say.

DBS said its 2026 Indonesia growth forecast of 5.3% could also be revised if supply disruptions spill into the second and third quarters.

Write to Ying Xian Wong at [e-mail]

(END) Dow Jones Newswires

04-01-26 0130ET