2018 Inflation Rate Under Control

In November 2018, inflation reached 0.27% (MoM) compared to the previous month. This brought the year-to-date (YTD) inflation rate for the January-November period to 2.5%, while the year-on-year (YoY) inflation rate was 3.23%. The 2018 inflation rate remained fairly controlled despite rising fuel prices and a weakening Rupiah that fell to over Rp 15,000 per US dollar.

Government measures to curb commodity price volatility, particularly food prices, and Bank Indonesia's (BI) policy of maintaining Rupiah stability by raising its benchmark interest rate, successfully maintained market stability. With food prices remaining stable until a month before the end of 2018, the year's inflation rate had the potential to stay below 3%. If this occurred, 2018 inflation would have been the lowest in nine years.

The controlled inflation rate this year was one of the factors driving the appreciation of the Rupiah to Rp 13,300 per US dollar. The increase in BI's interest rate to 6% and the bond yield reaching 7.95% significantly increased real returns for investors in the domestic financial market due to the controlled inflation rate of 3%. This means investors earned a real return of approximately 4.75%. In contrast, other emerging markets experienced much higher inflation rates: Argentina (45%), Turkey (21.6%), Egypt (17.7%), and the Philippines (6.7%).