September Inflation Hits 3.28%, Is the Indonesian Public's Wallet Safe?
Deputy Finance Minister Juda Agung has responded to Indonesia’s inflation, which is approaching the upper limit of the 3.5% target for September 2026. He explained that current inflation, which remains within the target range, does not necessarily have a significant impact on public purchasing power.
“If inflation is still within the target range, it means it has not yet significantly impacted purchasing power or consumer decision-making in spending because it remains controlled. That is ideal inflation,” he stated.
As reported by Statistics Indonesia (BPS), the annual headline inflation reached 3.28% in September 2026, an increase from 3.19% in August. This year-on-year inflation was driven by price increases across various expenditure groups, including food, beverages, and tobacco at 4.37%, and personal care and other services at 7.77%.
Other notable increases included clothing and footwear at 1.20%; housing, water, electricity, and household fuel at 1.02%; household supplies and maintenance at 2.19%; health at 2.24%; and transportation at 4.84%. BPS also noted inflation in information, communication, and financial services at 1.83%; recreation, sports, and culture at 1.81%; education at 1.43%; and food and beverage services/restaurants at 2.70%.
Deputy Minister Juda stated that the Ministry of Finance continues to coordinate with various policymakers to control inflation within the 1.5%-3.5% target. “The government, including the Ministry of Home Affairs, continues to work with Bank Indonesia to control this inflation,” he said during a media briefing in Bogor on Thursday (2/10/2026). He explained that concrete cooperation with Bank Indonesia includes the formation of the Central Inflation Control Team (TPIP) and Regional Inflation Control Teams (TPID).
Separately, Finance Minister Suahasil Nazara assessed that the September 2026 inflation of 3.28% (year-on-year) remains at a healthy level. “It shows that the economic movement of the community is progressing. Looking at the types of goods, I believe the inflation is very healthy,” Suahasil said at the Presidential Palace in Jakarta on Thursday (1/10/2026).
Despite the increase, Suahasil noted that inflation remains within the assumptions calculated by the government since the beginning of the year. “At 3.28%, it is a figure we are very comfortable with as it is within our inflation target range,” he explained.
Economic movement is also supported by Manufacturing PMI data reaching 52.4, the highest in seven months. “This indicates that industries are starting to purchase goods because they want to expand production,” said Suahasil. Furthermore, the trade balance recorded a surplus of US$3.5 billion. “These are good indications. Our economic fundamentals and resilience are visible in these statistical figures,” he concluded.
Challenges in Curbing Indonesian Inflation
Faisal Rachman, Head of Macroeconomic Research and Markets at Permata Bank, warned that domestically, pro-growth government policies are expected to drive an increase in money supply, potentially creating inflationary pressure. Additionally, the Free Nutritious Meal (MBG) programme could increase food demand and create risks of rising food inflation.
“This risk could intensify if an extreme El Niño phenomenon, known as ‘Godzilla El Niño’, occurs, which has the potential to disrupt agricultural production and drive up food prices,” he said, as quoted on Friday (2/10/2026).
On the other hand, high global energy prices remain a challenge for the government in using fiscal policy as an economic shock absorber. The need to maintain domestic energy prices at affordable levels could become increasingly expensive for the government. “This condition has the potential to increase the risk of energy price pass-through to energy and transport inflation,” Faisal emphasised.
From an external perspective, the risk of imported inflation remains high amidst ongoing uncertainty regarding geopolitical tensions in the Middle East and the direction of the Federal Reserve’s interest rate policy. These factors have created ‘risk-off’ sentiment, limiting foreign capital inflows and increasing pressure on the Rupiah exchange rate.
Faisal observed that pressure on the Rupiah is expected to remain relatively high until the end of 2026, alongside a widening current account deficit (CAD) and the dominance of short-term capital flows, particularly into Bank Indonesia Rupiah Securities (SRBI). “This capital flow could reverse quickly if the Fed takes a more hawkish stance than market expectations,” he said.
A weakening Rupiah will increase imported inflation and raise the cost of imported raw materials. This risk is already reflected in supply-side inflation, which is currently higher than demand-side inflation. This indicates an increased likelihood that rising production costs, especially for imported raw materials, will be passed on to consumers through higher prices for goods and services.
“Assuming the government maintains subsidised energy prices at current levels, headline inflation is expected to reach approximately 3.13% by the end of 2026, higher than the 2.92% in 2025,” said Faisal.