Indonesia Inflation Rises to 3.3% in September as Food and Energy Pressures Intensify
Indonesia’s September inflation was released on October 1, and as we expected, the headline inflation stood at 3.3% y/y compared with 3.2% in August, which marked the highest reading since June.
Bottom Line Up Front (BLUF): Indonesia’s September inflation was released on October 1, and as we expected, the headline inflation stood at 3.3% y/y compared with 3.2% in August, which marked the highest reading since June. Despite the CPI remains within Bank Indonesia’s 1.5%-3.5% target range, we expect inflation to stand at 3.3% y/y in 2026, close to the upper threshold due to higher energy costs, transportation and food prices.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), September 2024 – September 2026
Source: IslamicMacro
Indonesia’s September inflation was released on October 1, and as we expected, the headline inflation stood at 3.3% y/y compared with 3.2% in August, which marked the highest reading since June. The inflation was fuelled by the higher food, transport and housing prices.
Food inflation climbed to a three-month high of 4.37%, up from 3.86% in August, reflecting the continued impact of El Niño-related disruptions while housing and transport prices also triggered the CPI to surge in September.
On a m/m basis, the CPI slightly rose from 0.2% in August to 0.3 in September. Core inflation eased slightly from 2.92% in August to 2.84% in September which was good news for the policymakers as the underlying price pressures remained relatively contained.
In line with our assessments, Bank Indonesia (BI) also linked the increase mainly to lower food production in some regions due to weather disruptions, as well as higher production costs and added that higher prices for non-subsidised fuel also added to the increase in administered-price inflation.
It is worth noting that the Deputy Finance Minister Juda Agung said on October 1 that the September inflation figure had not yet had a significant impact on household purchasing power, as inflation was still within Bank Indonesia’s target range. Agung said the government needs to balance purchasing power, economic growth and fiscal sustainability, while noting that a broad increase in fuel prices could put additional through higher transport and food costs.
Despite the CPI remains within Bank Indonesia’s 1.5%-3.5% target range, we expect inflation to stand at 3.3% y/y in 2026, close to the upper threshold due to higher energy costs, transportation and food prices. We foresee price pressures will remain through Q4 2026 and Q1 2027 unless an unexpected credible truce is reached in Iran, which is not major In-House view.
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Analyst / Author Declaration: I, Volkan Sezgin, Independent Analyst and Researcher, declare that the views and conclusions expressed in this publication reflect my professional judgment at the time of publication and are presented in good faith. The analysis has been prepared independently and without improper influence or inducement. Where applicable, material conflicts of interest are disclosed. I observe applicable professional and internal compliance standards concerning confidentiality, independence and the responsible use of information.