Indonesia CPI Review: Festive demand drives CPI in December
December’s inflation uptick looks more festive than fundamental. With core pressures muted, Bank Indonesia has room to hold rates, but little appetite to loosen them just yet.
Indonesia’s consumer price index rose to 2.92% yr/yr in December 2025, marking the highest inflation reading in 20 months but staying well within Bank Indonesia’s (BI) revised inflation target of 1.5% to 3.5%. On a monthly basis, prices rose 0.64%, a notable jump from 0.17% in November, largely reflecting seasonal drivers at year-end.
Food and Transport Lead the Surge
The acceleration was led by food prices, which climbed 4.58% yr/yr in December, amid year-end holiday demand and supply chain fluctuations. Transportation costs also surged, rising to 1.23% y/y from 0.71%, driven by increased domestic travel during the festive period.Other categories registered more modest movements. Housing inflation ticked up to 1.62%, and recreation and cultural services posted a mild increase to 1.17%, suggesting broader inflationary pressures remain contained.
Despite the jump in headline inflation, core inflation was largely unchanged, edging up just 2 basis points to 2.38% y/y. This stability reinforces the view that the inflation spike is temporary and primarily seasonal, rather than systemic or demand-led. Officials from Statistics Indonesia (BPS) have framed the latest reading as a "normalisation" following an unusually low-inflation environment earlier in 2025, rather than a shift to a higher inflation regime.
| Metric | Nov 2025 | Dec 2025 |
|---|---|---|
| Headline Inflation (YoY) | 2.72% | 2.92% |
| Headline Inflation (MoM) | 0.17% | 0.64% |
| Core Inflation (YoY) | 2.36% | 2.38% |
| Food Inflation (YoY) | 4.25% | 4.58% |
With headline inflation moving closer to the upper band of the target range, Bank Indonesia is likely to maintain its policy rate at 4.75% in the February meeting. While the rise in headline CPI could appear concerning on the surface, BI is expected to look past the seasonal volatility and focus instead on the subdued core print and broader economic conditions, including a still-weak rupiah and fragile external demand.