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Indonesian economy: Low inflation favorable for IDR

Beating ours and market expectation (Bahana: 0.10% m-m, cons: 0.16% m-m), price index dropped -0.05% m-m or rose 6.83% y-y (Aug: 7.18% y-y driven by staple foods deflation at -1.07% m-m or 8.26% y-y inflation in September (Aug: 9.26% y-y). Prices of poultry products, red chillies, air transportation, red onions, cooking oil, fuel and eggs reported some price drops during September. Some price cut from state electricity company also added favorable number to energy inflation at -0.26% m-m or 12.55% y-y (Aug: 14.47% y-y), administered price inflation at -0.40% m-m or 11.26% y-y (Aug: 12.32%) and transportation inflation at -0.40% m-m or 8.00% y-y (Aug: 8,17% y-y). Higher prices still occurred for rice, education spending, gold jewelry, carrots, cigarettes and housing rentals. We suspect continued rising rice price is an impact of El Nino season.

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