Electricity tariffs and housing costs drive annual inflation despite monthly deflation
Indonesia opened 2026 with a notable inflation rebound, highlighting how past policy measures can shape present economic indicators and public perception.
Annual Inflation Rebounds in Early 2026
Indonesia’s Central Statistics Agency (BPS) reported that inflation in January 2026 reached 3.55 percent year on year, rising from 2.92 percent in December 2025. The increase was largely driven by a statistical low base effect rather than a sudden surge in consumer demand.
Utilities Lead Price Increases
The Consumer Price Index rose from 105.99 in January 2025 to 109.75 in January 2026. The housing, water, electricity, and household fuel group recorded the highest inflation at 11.93 percent, contributing 1.73 percent to total inflation.
Electricity Tariffs as Main Contributor
Electricity tariffs were the largest individual contributor within the utilities category. BPS Deputy for Distribution and Service Statistics Ateng Hartono stated during a press briefing on February 2, 2026, that tariff adjustments significantly influenced annual inflation levels.
Other Spending Categories Also Rise
Jewelry emerged as the second-largest contributor to inflation, followed by the health sector, food and beverage consumption, and tobacco products. This indicates that inflationary pressures were spread across both essential and non-essential goods.
Monthly Deflation Masks Annual Increase
Despite higher year on year inflation, January 2026 recorded a monthly deflation of 0.15 percent compared with December 2025. BPS explained that this reflected short-term price movements rather than underlying economic weakness.
Low Base Effect Explains the Discrepancy
The low base effect stemmed from electricity tariff discounts implemented in January and February 2025, which suppressed prices and lowered the CPI at that time. When those discounts ended, year on year inflation in January 2026 appeared higher due to the unusually low comparison base.
Indonesia’s January 2026 inflation highlights the importance of understanding statistical dynamics behind headline figures. For policymakers, businesses, and consumers in Indonesia and Singapore, the data underscores how temporary policy interventions can influence long-term economic readings and shape cross-border economic expectations in the region.
Sources: EN Tempo (2026) , Trading Economics (2026)
Keywords: Indonesia Inflation, Consumer Price Index, Electricity Tariff, Low Base Effect, BPS Data
