Application of the Holt Winters Method for Inflation Forecasting in Indonesia

Inflation is a macroeconomic indicator that affects the economic stability of a country. Therefore, inflation forecasting is important in assisting policy makers in designing effective economic strategies. This study aims to apply the Holt-Winters method in forecasting inflation in Indonesia using data from January 2015 to December 2023. The Holt-Winters method is one of the exponential smoothing techniques that can handle trend and seasonal patterns in time series data. The models used in this study are Holt-Winters Additive and Holt-Winters Multiplicative. Evaluation of forecasting accuracy is done using Mean Absolute Error (MAE). The analysis results show that both models are able to provide fairly accurate forecasting with a small MAE value. The Holt-Winters Multiplicative model shows slightly better performance than the Holt-Winters Additive model, but the difference is not significant. Therefore, the Holt-Winters method can be used as a reliable alternative in forecasting inflation in Indonesia.