Indonesia Macro Update - INF 02 Dec 2025
KBVS MACRO UPDATE
Tuesday, 2 December 2025
Cooling Headline Inflation Masks Rising Core and Input Cost Risks
Indonesia’s headline CPI inflation eased to 0.17% MoM and 2.72% YoY in Nov ‘25. Beyond demand–supply dynamics, the persistence of core inflation in Nov ’25 also reflects the impact of Rupiah depreciation, which averaged around 0.6% MoM during the month. Inflationary pressures were also reflected in the latest S&P Global Indonesia Manufacturing PMI.
Looking ahead, risks stem not only from the potential rise in manufactured goods inflation but also from weather-related disruptions. Rupiah depreciation remains another concern, though expectations of a Fed rate cut—likely 25 bps at the 10 Dec ’25 meeting—may help stabilize the currency thereafter, reducing imported inflation pass-through to both core and headline measures.
From a monetary-policy perspective, if inflation remains contained, we expect Bank Indonesia to have room for a rate cut this month. Such a coordinated policy shift would likely improve liquidity conditions, drive a further decline in SUN10Y yields, and enhance the relative attractiveness of Indonesian financial assets.
Regards,
KBVS Research Team