• Indonesia’s CPI inflation rose to 3.19% YoY (+0.21% MoM) in Aug-26, compared to 2.88% in Jul-26. The rebound was broadly expected, driven by an increase in food prices, gold prices and lingering transportation costs.
• Volatile food remained the primary driver, accelerating to 4.06% YoY (0.88% MoM) in Aug-26. While El Niño conditions have begun to set in, it would be premature to attribute the full effect to the weather as the event has only just started and has yet to reach its peak.
• The more immediate cause is the resumption of the school season, which brought with it the return of the Free Meal Program rollout. This is most visibly seen in chicken meat prices, which began rising precisely as the school season resumed in mid-July and have continued to climb since.
• Core inflation also picked up, reaching 2.92% YoY (0.21% MoM) in Aug-26. However, this uptick was not a reflection of strengthening consumer demand, and more a product of gold prices rising once again (+31.0% YoY) during the month. Stripping out gold, underlying demand-side pressures remained, consistent with the slowdown in several real sector indicators (including our Big Data).
• Elevated inflation is likely to persist through year-end, driven by several structural forces. The ongoing Middle East conflict continues to exert upward pressure on global oil prices. El Niño is still in its early stages, its full impact on the next planting season and food supply has yet to materialize. Meanwhile, the Rupiah remains under pressure, keeping imported inflation a live concern.
• The newly instated BI Governor, Destry Damayanti, has reaffirmed the commitment to keep inflation within the 1.5-3.5% target, pointing out food inflation as a primary concern. Yet beyond food, Indonesia faces a more structural challenge: imported inflation, driven by Rupiah depreciation and imported commodity prices, with the latter remains largely outside the direct reach of domestic policy tools, leaving exchange rate stability as the stabilization lever.
• On that front, Governor Damayanti has explicitly pledged to defend the Rupiah, while also signaling that the BI rate is not the sole instrument at BI’s disposal – indicating she might try to hold interest rates this year. With the Dollar now regaining strength as markets price in a more hawkish Fed and nearly all global long-term yields are rising sharply – both the Rupiah and the new BI Governor’s vision may soon be put to the test.

Versi lengkap report ini (dan report sebelumnya) dapat diakses lewat link berikut: https://s.id/BCA_REI