On the other hand, these segments drove monthly inflation: clothing at 0.64 percent mom; processed food, cigarettes and tobacco at 0.63 percent mom; health at 0.26 percent mom; and education at 0.06 percent mom (Exhibit 3).

The wholesale price index rose by 0.08 percent mom and 12.49 percent yoy (January: +1.06 percent mom; +11.44 percent yoy), supported by an increase in the agriculture price index of 1.43 percent mom and 55.30 percent yoy, while some sectors are still in a downturn, such as mining at -0.67 percent mom and -2.47 percent yoy (January: -0.11 percent mom; -1.66 percent yoy); manufacturing at -0.35 percent mom and +3.19 percent yoy (January: +0.58 percent mom; +3.39 percent yoy).

On the international trade front, the non-oil and gas import price index was down 0.02 percent mom and up 4.45 percent yoy (January: +0.28 percent mom; +5.05 percent yoy), while non-oil and gas export prices fell 0.76 percent mom but rose 4.11 percent yoy (January: +1.49 percent mom; +2.92 percent yoy). In general, the non-oil and gas wholesale price index fell by 0.07 percent mom and rose 9.86 percent yoy (January: +1.02 percent mom; +9.02 percent yoy) (Exhibit 2).

On Tuesday, the government announced further electricity tariff cuts by 2.66 percent to 2.71 percent from February tariff levels across all segments (Exhibit 1). Cumulatively, we already had a cut of around 10 percent in electricity tariffs since January.

For fuel prices, state-owned oil company Pertamina also announced a decision to cut non-subsidized fuel prices by 1.32 percent to 2.45 percent this month, and it plans to announce the decision for subsidized fuel prices in April.

Hence, deflationary pressure should persist in March. The expectation of lower energy prices and higher disposable income should provide support for continued rupiah appreciation in our view.

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The writer is an economist at Bahana Securities