Indo inflation: Feb CPI down on food, CPI revised down - JP Morgan

February inflation in Indonesia rose 0.2 %m/m, sa, and leaving it up a lower-than-expected 6.8%oya (J.P. Morgan: 7.3%oya and consensus: 7.1%oya). Core inflation (ex food and energy) was up 0.4%m/m, sa and printed 4.4%oya from 4.2% in January. The main observation in the February inflation data is that the food contribution to inflation was negligible, with almost all the sequential increase owing to non-food prices which continues at a sequential pace very similar to the previous year (first chart).

Key calls:
* Sin Beng now expects CPI to peak between 7.2-7.6%oya in 2Q11 from a previous forecast of an 8.4%oya peak. Full year inflation is now expected average 6.7%oya against a previous average of 7.5%oya.
* He is now forecasting that BI will be on hold at the current policy rate of 6.75% until the prices of subsidized energy are raised.
* Stronger FX, which J.P. Morgan forecasts to reach US$/IDR 8700 by end-2Q11 (see Indonesia: 2011 BoP revised up – commodity tailwinds remain strong, Jan 6 2011).