Inflation exceeded the cons in October 25
Indonesia’s inflation rate in October 2025 climbed to 0.28% MoM and 2.86% YoY, surpassing both the previous month’s figures and market expectations. The increase was primarily driven by personal care and other services, gold jewelry, and food items such as red chili, chicken eggs, and chicken meat. Notably, the rise in chicken prices is likely linked to heightened demand from the Free Nutritious Meals (MBG) program, which has intensified consumption from institutional kitchens. Meanwhile, gold prices remain elevated due to global demand for safe-haven assets amid ongoing macroeconomic uncertainty. Interestingly, the inflation was not fueled by food or gold prices, as both categories showed signs of stabilization. Instead, the acceleration in services inflation—particularly in import-heavy sectors like healthcare and transport—suggests that businesses are increasingly confident in passing on higher costs to consumers, signaling a recovery in domestic demand. This trend, while encouraging from a growth perspective, also raises concerns about supply-side vulnerabilities, such as currency depreciation and weather-related disruptions to food production. As inflation continues to trend upward, policymakers may need to adopt a more flexible fiscal stance to balance growth support with inflation control

Sign of demand recovery
Indonesia’s core inflation in October 2025 stood at 2.36% YoY, slightly up from 2.19% in the previous month, indicating a modest but persistent upward trend. This stability in core inflation—excluding volatile food and administered prices—suggests that underlying price pressures are gradually building, likely driven by structural factors such as rising costs in services and imported goods. The slight uptick reflects improving consumer demand, as businesses begin to pass on higher input costs, especially in sectors like healthcare and transport. However, the pace of increase remains subdued, implying that while demand is recovering, it is not yet strong enough to trigger aggressive price hikes. This also signals that monetary policy may still have room to remain accommodative, though vigilance is needed to monitor any acceleration in core components that could signal more entrenched inflationary pressures.

Keep an eye out for the return of DXY as IDR has weakened
The DXY has successfully maintained its upward trajectory, marking four straight days of increases. During these six trading sessions, the index improved by 1.26% overall. In the last month, the DXY increased by 1.84%. The ongoing partial shutdown of the federal government is creating concerns regarding the economy, delaying the release of important economic information. This situation led Federal Reserve Chair Jerome Powell to caution investors against the belief that the center of U.S. banking would keep lowering interest rates in December. “It is far from certain that there will be more reductions to the main interest rate during the December meeting,” Powell stated during a press conference following the FOMC meeting, as reported by Bloomberg News. This situation caused investors to feel a bit less confident about The Fed's plans for cutting the main rate. As a result, investor worry led to an increase in demand for U.S. dollars.

Balancing optimism
The recent uptick in inflation may reflect growing producer confidence, as higher prices in areas like recreation and sport services suggest improving household demand—an intended outcome of government programs like MBG. This signals that fiscal stimulus is beginning to translate into real economic activity. However, risks remain. Wetter weather could disrupt food supply just as initiatives like MBG and E10 fuel increase demand for agricultural goods, potentially straining availability and pushing prices higher. In this context, food policy must become a priority, not only to stabilize prices but also to ensure supply resilience amid shifting demand patterns. These dynamics suggest that while inflation is partly demand-driven and reflects economic recovery, it also carries supply-side risks that could complicate the policy response. A flexible and responsive fiscal strategy especially in food security and distribution will be crucial to sustaining momentum while cushioning vulnerable sectors from short-term shocks.

Nickel - Abundant Supply Persists

Nickel - Abundant Supply Persists

Muhammad Fariz

10 October 2025 - 07.38am

Nickel - Abundant Supply Persists

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