Indonesia's annual inflation rate slid below 3% in September, according to official data, which is close to the lower end of the central bank's goal range and broadly in line with market expectations. 

At a press conference on Monday, October 2, 2023, Statistics Indonesia revealed that September 2023 Consumer Price Index (CPI) inflation was recorded at 0,19% (mtm), thus 2.28% (yoy), lower than the previous month's CPI inflation, which was recorded at 3.27% (yoy). 

Core inflation remains low in September 2023 at 0.12% (mtm or relatively stable compared to inflation in the previous month of 0.13% (mtm). On an annual basis, core inflation in September 2023 was recorded at 2.00% (yoy) or lower than the previous month of 2.18% (yoy). 

Previously, Bank Indonesia targeted inflation in September to reach 2% to 4%. And several economic observers estimate that inflation in that period will reach 0.13% compared to the previous month. 

Bank Indonesia said maintained inflation is the outcome of monetary policy consistency and close inflation control collaboration. 

"Inflation stability is the real result of synergy between Bank Indonesia and the central and regional governments through strengthening the National Food Inflation Control Movement (GNPIP) in various regions.” Bank Indonesia outlined this in a report. 

The biggest contributor to inflation on a yearly basis (yoy) was the food, beverage, and tobacco group at 2.28%. Then, followed by the clothing and footwear group with an inflation contribution of 1.08% and housing, water, electricity, and household fuel at 0.05%. 

Meanwhile, the commodities contributing to inflation on a monthly basis (mtm) were rice with a contribution of 0.18% and gasoline with a contribution of 0.6% due to the increase in non-subsidized fuel prices. There is also a contribution of 0.01% for several other commodities, such as cellphone credit rates, tuition or academic fees, filtered clove cigarettes, and beef. 

With these developments, Bank Indonesia believes inflation will remain under control within the target range of 3.0 ± 1% in 2023 and 2.5% ± 1% in 2024. 

This comes as the market prepares for the possibility of a long era of high interest rates and governments' enormous borrowing demands as yield for US bonds surpassed 4.95% for the first time since 2007—before the financial crisis. 

As a consequence, the rupiah weakened as of Wednesday, October 4, to a level of Rp. 15,600 per US dollar. To address the problem, Bank Indonesia maintained price stability with past rate hikes and purchased government bonds to prevent a decline in the debt market and the value of the rupiah. 

It was Bank Indonesia's first bond-buying operation since 2022, highlighting the concern in government circles about the market turmoil and the rupiah's decline to its lowest level since December 30. 

"We have raised the rates by 225 basis points. And this figure, 225 bps, we view as enough to maintain stability right now, stability in inflation, and on the other hand, enough to spur lending growth," Destry Damayanti, as quoted by Reuters, referring to rate hikes between August and January.