Inflation Is Projected To Decrease In January 2025

SHUTTERSTOCK/SAUKO ANDREI

Inflation Is Projected To Decrease In January 2025

Monday, 03 Feb 2025

The Consumer Price Index (CPI) is anticipated to decline in January 2025. The demand following the year-end holidays is identified as a factor contributing to the decrease in inflation at the beginning of 2025. Josua Pardede, Chief Economist at Bank Permata, stated that inflation for January 2025 is expected to reach 0.40% month-on-month (MoM), a decrease from December 2024's rate of 0.45% MoM. The decline in inflation is attributed to the volatile price group, which is projected to be 1.71% MoM, slightly lower than the previous month's increase of 2.04% MoM. "The inflation of volatile prices is likely to decrease compared to the previous month, due to reduced demand following the holiday season in December 2024," Josua remarked on Sunday, February 2, 2025.

Josua also predicts that inflation for government-regulated prices will remain stable on a monthly basis. The government is not expected to implement significant price adjustments for energy or other goods and services. Core inflation is projected to rise slightly to 0.18% MoM, influenced by the depreciation of the rupiah and an increase in gold prices.

Year-on-year inflation is expected to increase from 1.57% in December 2024 to 1.94% in January 2025, approaching the midpoint of the target range. "Conversely, the annual core CPI inflation is anticipated to decrease slightly to 2.24% YoY from 2.26% YoY in December 2024," Josua explained. Government-regulated price inflation is estimated to reach 1.05% YoY, while the volatile price index is projected to rise by 1.82% YoY. Josua further forecasts that inflation for this year will increase to 2% YoY due to the government's revision of the VAT rate.

Inflation is expected to remain within Bank Indonesia's target range of 1.5% to 3.5% by the end of the year. "Previously, we assessed that domestic inflation could rise to 3% in 2025. However, the recent government announcement regarding the revision of VAT policy may mitigate its impact on inflation," Josua stated. He predicts that inflation in 2025 will continue to be influenced by a low base effect following a significant slowdown in 2024.