Indonesia posts first annual deflation in more than two decades

Indonesia recorded its first annual deflation in more than two decades as electricity tariffs and prices of some staple foods fell, potentially giving room for the central bank to weigh a rate cut if the rupiah stabilizes.

Consumer prices fell 0.09 percent year-on-year in February for the first time since March 2000, according to statistics agency data released Monday. The annual figure also missed economists’ lowest estimate of 0.04 percent inflation in a Bloomberg News survey.

The deflation came as prices in the housing, water, electricity and household fuel fell further to 12 percent year-on-year as the government discounts on electricity tariffs for certain customers lasted until the end of last month. Prices of staple foods such as rice, tomato and red chili also fell. Prices also fell on a monthly basis, extending a deflation in January.

The decline in the annual consumer price index drove inflation in Southeast Asia’s largest economy further below Bank Indonesia’s target range of 1.5 percent - 3.5 percent for 2025. However core inflation, which strips out the impact of volatile food and energy prices, continued picking up to 2.48 percent amid higher prices of items such as gold jewelry and cooking oil.

Rupiah rose for the first time in five days on Monday supported by regional sentiment and as revised rules requiring natural resources exporters to keep all FX earnings onshore for a year came into effect. Even so, the currency is still the the worst performer among Asia’s major currencies this year, having declined 2.32 percent.

BLOOMBERG