Indonesia’s Core Inflation Rate YoY Holds Steady at 2.36% in December 2025
Table of Contents
Indonesia’s core inflation rate year-over-year (YoY) held steady at 2.36% in December 2025, according to the latest release from the Sigmanomics database. This figure matches November’s reading and is slightly below the consensus estimate of 2.40%. The rate has moderated from a peak of 2.50% in May 2025, reflecting a gradual easing of underlying price pressures.
Drivers this month
- Shelter and utilities contributed 0.15 percentage points (pp) to core inflation.
- Food and beverage prices remained stable, contributing 0.05 pp.
- Transport and communication sectors saw minor deflationary effects, subtracting -0.04 pp.
Policy pulse
The 2.36% core inflation rate remains comfortably within Bank Indonesia’s target band of 2.00%–3.00%. This supports the central bank’s current neutral monetary policy stance, with no immediate pressure to tighten or loosen policy. Inflation expectations remain well-anchored, allowing for measured policy calibration.
Market lens
Immediate reaction: The Indonesian rupiah (IDR) showed marginal appreciation against the USD in the first hour post-release, while 2-year government bond yields remained stable near 6.30%. Breakeven inflation swaps for the next two years held steady at 2.50%, signaling market confidence in inflation control.
Core inflation is a critical gauge of underlying price trends, excluding volatile food and energy components. Indonesia’s steady 2.36% YoY core inflation aligns with moderate GDP growth of 5.10% in Q3 2025 and a stable unemployment rate near 5.00%. The consumer price index (CPI) headline inflation stood at 3.10% YoY in December, reflecting some volatility in food and energy prices.
Monetary Policy & Financial Conditions
Bank Indonesia has maintained its benchmark 7-day reverse repo rate at 5.75% since September 2025. Financial conditions remain accommodative, with credit growth steady at 10.20% YoY. Inflation stability supports the central bank’s cautious approach amid global tightening cycles and external shocks.
Fiscal Policy & Government Budget
The government’s fiscal deficit narrowed to 2.50% of GDP in 2025, aided by improved tax collection and controlled spending. Fiscal prudence helps contain inflationary pressures from demand-side shocks, reinforcing macroeconomic stability.
External Shocks & Geopolitical Risks
Indonesia faces moderate risks from global commodity price volatility and geopolitical tensions in the Asia-Pacific region. The IDR’s resilience against USD fluctuations mitigates imported inflation risks, but ongoing vigilance is warranted.
Drivers this month
- Shelter costs contributed 0.18 pp, consistent with gradual housing demand recovery.
- Used car prices exerted a mild downward pressure of -0.05 pp due to supply normalization.
- Communication services inflation remained flat, contributing 0.00 pp.
Policy pulse
The core inflation rate’s persistence near the 2.30%–2.40% range supports Bank Indonesia’s current neutral stance. The central bank is likely to monitor incoming data closely before adjusting rates, given the balance between domestic demand strength and external uncertainties.
Market lens
Immediate reaction: The IDR/USD currency pair appreciated by 0.10% within the first hour, while 2-year government bond yields held steady at 6.30%. Inflation-linked bond spreads narrowed slightly, reflecting market confidence in inflation management.
This chart highlights Indonesia’s core inflation stabilizing after a mild decline from mid-2025 highs. The trend suggests inflation expectations are well-anchored, supporting a steady macroeconomic environment amid external headwinds.
Looking ahead, Indonesia’s core inflation trajectory will depend on several factors, including global commodity prices, domestic demand, and monetary policy responses. The following scenarios outline potential paths:
Bullish Scenario (30% probability)
- Global commodity prices stabilize or decline, easing imported inflation.
- Domestic demand growth moderates, keeping inflation near 2.20%–2.40%.
- Bank Indonesia maintains current rates, supporting steady growth.
Base Scenario (50% probability)
- Core inflation remains stable around 2.30%–2.50% YoY.
- Monetary policy remains neutral with gradual adjustments if needed.
- Fiscal discipline continues, offsetting inflationary pressures.
Bearish Scenario (20% probability)
- External shocks push commodity prices higher, raising inflation above 2.70%.
- Currency depreciation increases imported inflation risks.
- Monetary tightening becomes necessary, potentially slowing growth.
Structural & Long-Run Trends
Indonesia’s inflation has trended downward over the past decade, reflecting improved monetary frameworks and fiscal management. Structural reforms in supply chains and digitalization may further anchor inflation expectations, supporting sustainable growth.
Indonesia’s core inflation rate holding steady at 2.36% YoY signals a balanced macroeconomic environment. The data from the Sigmanomics database confirm that inflation remains well within the central bank’s target range, supporting a neutral monetary policy stance. While external risks persist, domestic fiscal prudence and resilient demand provide a buffer. Market reactions suggest confidence in inflation control, though vigilance is warranted amid geopolitical uncertainties. Overall, Indonesia’s inflation outlook is cautiously optimistic, with manageable upside and downside risks.
Key Markets Likely to React to Core Inflation Rate YoY
Indonesia’s core inflation data typically influence local currency strength, bond yields, and equity market sentiment. Key tradable instruments include the IDRUSD forex pair, which reflects currency valuation shifts linked to inflation expectations. The JCI index tracks Indonesian equities sensitive to inflation and monetary policy. Indonesian government bonds, represented by the INDO10Y, react to inflation and rate outlooks. Additionally, the BTCUSD pair often moves inversely to inflation fears globally, while the USDCNY pair impacts regional trade dynamics affecting Indonesia’s inflation indirectly.
Indicator vs. IDRUSD Since 2020
Since 2020, Indonesia’s core inflation rate and the IDRUSD exchange rate have shown a moderate inverse correlation. Periods of rising core inflation often coincide with IDR depreciation due to expectations of monetary tightening. The 2025 stabilization of core inflation at 2.36% has supported a steady IDR, with less volatility compared to prior years. This relationship underscores the importance of inflation data in guiding forex market sentiment and central bank policy expectations.
FAQ
- What is the current Core Inflation Rate YoY for Indonesia?
- The latest core inflation rate for Indonesia is 2.36% year-over-year as of December 2025.
- How does Indonesia’s core inflation affect monetary policy?
- Stable core inflation within the target range supports a neutral monetary policy stance by Bank Indonesia.
- What external factors influence Indonesia’s inflation?
- Global commodity prices, currency fluctuations, and geopolitical tensions are key external drivers of inflation in Indonesia.
Takeaway: Indonesia’s core inflation rate remains steady and well-anchored, supporting a balanced policy outlook amid external uncertainties.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
IDRUSD – Indonesian rupiah vs. US dollar, sensitive to inflation and monetary policy shifts.
JCI – Jakarta Composite Index, reflects equity market response to inflation and economic conditions.
INDO10Y – Indonesian 10-year government bond, tracks inflation expectations and interest rate outlook.
BTCUSD – Bitcoin vs. US dollar, often inversely correlated with inflation fears.
USDCNY – US dollar vs. Chinese yuan, influences regional trade and inflation dynamics.
The December 2025 core inflation rate of 2.36% YoY matches November’s reading and remains above the 12-month average of 2.32%. This stability follows a downward trend from the 2.50% peak in May 2025, indicating a steady easing of inflationary pressures.
Monthly data from the Sigmanomics database show a consistent range between 2.17% and 2.50% over the past year, with the current figure reflecting a plateau rather than a sharp decline or rise.