Inflation Outlook 2026

Indonesia’s inflation in 2025 shifted from an unusually low start to a more normalized level by year-end, driven mainly by the expiration of temporary administered price measures rather than weak demand, with inflation closing the year at 2.92% (YoY) and remaining within Bank Indonesia’s target range. As the year progressed, inflation pressures became increasingly uneven: food prices were sensitive to weather disruptions, logistics constraints, and regional supply shocks, disproportionately affecting the aspiring middle-income group, while core inflation stayed moderate but was persistently influenced by rising gold jewelry prices amid heightened global uncertainty, reflecting asset-driven rather than demand-driven pressures. Entering 2026, inflation is projected to briefly exceed the upper bound of the target range at the beginning of the year (3.75–3.82% YoY), driven by low base effects, food supply risks, Rupiah depreciation, and global volatility, before easing and ending the year within the target range at 2.81–3.00% (YoY), assuming no major global energy or financial shocks and continued coordination between monetary policy and government supply-side interventions.

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