CIMB Economic Update Inflation Mar 10: Seasonal ease

Headline inflation dropped to 3.43% yoy from 3.81% in February as the harvest season kicked in, lower than our prediction of 3.53% as well as market consensus (3.70%). Mom, price dropped to -0.14% (0.84% in Feb 10). Lower food prices were the main reason, as raw food prices were down 0.91% in March (1.73% in Feb 10). We believe this represented only seasonal easing as government plans to raise electricity tariffs and retail LPG prices are intact. With softer headline and core inflation, we believe Bank Indonesia (BI) still has the flexibility to keep the BI Rate at 6.5% during its next policy meeting on 6 Apr, until May 10, to support a stronger economic recovery.