Indonesia’s inflation rate for December 2025 increased by 0.17% month-over-month (MoM), according to the latest data from the Sigmanomics database. This figure came in below market expectations of 0.30% and represents a slowdown from November’s 0.28% rise. Over the past year, inflation has shown volatility, with peaks such as April’s 1.65% MoM spike and troughs like March’s -0.48%. The current moderation reflects easing commodity prices and stable domestic demand.

Drivers this month

• Shelter and utilities contributed 0.12 percentage points (pp) to inflation.
• Food and beverages added 0.05 pp, reflecting seasonal harvest effects.
• Transportation costs declined slightly, subtracting -0.02 pp amid lower fuel prices.

Policy pulse

At 0.17% MoM, inflation remains within Bank Indonesia’s target corridor of 2-4% annualized, supporting a neutral monetary policy stance. The central bank has held the benchmark rate steady at 5.25% since October, balancing growth and inflation risks.

Market lens

Immediate reaction: The Indonesian rupiah (IDR) appreciated modestly by 0.15% against the USD in the first hour post-release, while 2-year government bond yields edged down 3 basis points, signaling relief over contained inflation pressures.

Indonesia’s inflation dynamics must be viewed alongside key macroeconomic indicators. GDP growth for Q3 2025 held steady at 5.10% YoY, supported by domestic consumption and export resilience. Unemployment remains low at 4.20%, while wage growth has moderated to 3.50% YoY, limiting upward pressure on prices.

Monetary policy & financial conditions

Bank Indonesia’s policy rate at 5.25% remains accommodative but vigilant. Inflation expectations for 2026 hover around 3.20%, consistent with the central bank’s target. Credit growth slowed to 9.80% YoY in November, reflecting cautious lending amid global uncertainty.

Fiscal policy & government budget

The government’s fiscal deficit narrowed to 2.50% of GDP in 2025, aided by improved tax collection and controlled subsidies. Infrastructure spending continues to support growth without stoking inflation. The budget outlook for 2026 anticipates a similar deficit, maintaining fiscal prudence.

External shocks & geopolitical risks

Global commodity prices, especially palm oil and coal, have softened recently, easing imported inflation. However, geopolitical tensions in Southeast Asia and supply chain disruptions remain downside risks. The IDR’s resilience is tested by intermittent capital outflows linked to US monetary policy shifts.

Market lens

Immediate reaction: The IDR/USD pair strengthened by 0.15% post-release, while 2-year government bond yields declined by 3 basis points, indicating market confidence in inflation containment. Breakeven inflation rates for 5-year bonds remained stable at 3.30%, suggesting steady medium-term inflation expectations.

Looking ahead, Indonesia’s inflation trajectory will be shaped by several factors. The base case scenario (60% probability) anticipates inflation averaging 3.10% YoY in 2026, supported by stable commodity prices and moderate wage growth. Bank Indonesia is expected to maintain a cautious but accommodative stance.

Bullish scenario (20% probability)

• Global commodity prices decline further, easing imported inflation.
• Strong fiscal discipline and productivity gains reduce cost pressures.
• Inflation averages 2.50% YoY, allowing for gradual rate cuts.

Bearish scenario (20% probability)

• Supply chain disruptions or geopolitical shocks push prices higher.
• Wage pressures accelerate beyond 4% YoY.
• Inflation exceeds 4.50% YoY, forcing monetary tightening.

Policy pulse

Monetary policy will remain data-dependent. Any upside inflation surprises could prompt rate hikes, while persistent softness may lead to easing. Fiscal policy is expected to remain prudent, balancing growth support and inflation control.

Indonesia’s December 2025 inflation print of 0.17% MoM signals a moderation in price pressures after a volatile year. The data supports a stable macroeconomic outlook with contained inflation, steady growth, and manageable external risks. Bank Indonesia’s cautious monetary stance and the government’s fiscal discipline remain key pillars. However, vigilance is warranted given geopolitical uncertainties and potential supply shocks. Structural reforms enhancing productivity and diversification will be critical for long-run price stability.

Key Markets Likely to React to Inflation Rate MoM

Indonesia’s inflation data typically influences currency, bond, and equity markets. The Indonesian rupiah (IDRUSD) often moves in response to inflation surprises, reflecting shifts in monetary policy expectations. Government bonds (INDO10Y) react to inflation trends affecting yields. The Jakarta Composite Index (JKSE) is sensitive to inflation-driven cost pressures on companies. Commodities like palm oil (PALM) correlate with inflation via input costs. Finally, Bitcoin (BTCUSD) sometimes serves as an inflation hedge, influencing investor sentiment.

• IDRUSD – Indonesian rupiah vs. USD, sensitive to inflation and policy shifts.
• JKSE – Jakarta Composite Index, reflects corporate earnings impacted by inflation.
• PALM – Palm oil stock, linked to commodity-driven inflation.
• INDO10Y – Indonesian 10-year government bond, sensitive to inflation expectations.
• BTCUSD – Bitcoin, viewed as an inflation hedge in volatile markets.

FAQs

What is the current inflation rate MoM for Indonesia?

The latest inflation rate MoM for Indonesia is 0.17% as of December 2025.

How does Indonesia’s inflation affect monetary policy?

Inflation within the 2-4% target range supports a neutral monetary stance, while deviations may prompt rate adjustments.

What external factors influence Indonesia’s inflation?

Global commodity prices, geopolitical risks, and currency fluctuations are key external drivers of inflation in Indonesia.

Takeaway: Indonesia’s inflation moderation in December 2025 supports a stable macro outlook, but vigilance remains essential amid external uncertainties.