We observed a declining inflation rate trend throughout 2024, returning to Bank Indonesia’s inflation target. Inflation reached its highest point in March 2024 at 3.05% and steadily decreased, hitting 1.57% in December 2024. This is the lowest inflation rate in two decades, excluding the pandemic period of 2020-2021 and the post-pandemic years of 2022-2023.
The decrease in the inflation rate from February to December 2024 was primarily driven by a sharp decline in volatile inflation and administered inflation. Volatile inflation rose during the early months of January to March 2024 but then declined continuously, culminating in deflation in November 2024 (-0.32%). Administered inflation also dropped significantly, from 1.74% in January 2024 to 0.56% in December 2024. Throughout 2024, administered inflation only recorded increases in June and August. However, a low inflation rate does not always signal a healthy economy, as core inflation experienced a slight decline in 2024.
By consumption types, food ingredients, and food, beverages, and tobacco recorded the highest inflation spikes in 2024. Rising rice prices, a staple food for Indonesian households, primarily drove inflation in food ingredients. The increase in rice prices was linked to several challenges in agricultural production. Meanwhile, the food, beverages, and tobacco inflation was driven by various factors, most notably the rising costs of cooking oil and tobacco.
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