Indonesia Macro Update - Inflation Update 02 Oct 2025
KBVS MACRO UPDATE
Wednesday, 2 October 2025
Indonesia’s Sep ‘25 Inflation: Rising on Food Prices, Gold, and Rupiah Depreciation
As anticipated, headline inflation in Sep ‘25 continued its upward trajectory, recording 0.21% MoM or 2.65% YoY (Cons: 2.50% YoY; KBVS: 2.51% YoY; Prev: 2.31% YoY). The steepest monthly price increases at traditional markets were observed in red chili (+18.15% MoM) and chicken meat (+7.06% MoM), followed by eggs (+0.76% MoM), beef (+0.18% MoM), and cooking oil (+0.11% MoM). Within core inflation, upward pressures were traced mainly to higher jewelry gold prices and tuition fees at academies and universities.
Looking ahead, the persistent uptrend in global gold prices, combined with continued Rupiah weakness, is expected to remain a key driver of core inflation in the near term. We anticipate some relief from currency depreciation pressures should the FOMC deliver another 25 bps Fed Funds Rate cut on 29 October 2025, which markets have largely priced in.
The domestic front, however, several factors could add to inflationary pressures in October: a) additional liquidity injections—via IDR200tn in excess budget funds (SILPA) transferred by Bank Indonesia to state-owned banks (Himbara)—and; b) higher government spending, particularly civil servant salary adjustments under Presidential Regulation No. 79/2025 (8–12% increase), pose upside risks to Oct ‘25 inflation. Nonetheless, food assistance programs, are expected to provide some offset, helping to stabilize prices of staple goods.
Regards,
KBVS Research Team