Sri Mulyani's Subordinates Talk About An Increase In Core Inflation, Push BI To Raise Interest Rates?

Minister of Finance Sri Mulyani (right) talks with BI Governor Perry Warjiyo (Photo: Doc. Antara)

JAKARTA - The Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu said that the inflation rate in April 2022 which increased to 3.47 percent year on year (yoy) was driven by global commodity prices and stronger demand during the fasting period and Eid.

"This indicates that domestic economic activity is higher," he said in a press statement quoted on Tuesday, May 10.

According to Febrio, inflation in all sample cities strengthens the signal that economic activity has improved in various regions.

"The rising core inflation reflects people's purchasing power which continues to recover amid global price pressures and the implementation of the increase in VAT (Value Added Tax)," explained Sri Mulyani's subordinate.

Meanwhile, Febrio's statement is a response to the release of the Central Statistics Agency (BPS) regarding the latest developments in inflation levels.

In its report, BPS said that apart from the general increase in inflation, the core inflation rate in April 2022 also experienced the same thing with a record 2.60 percent yoy. This figure is the highest level since June 2020.

On the other hand, core inflation is one of the main benchmarks for Bank Indonesia (BI) in setting its benchmark interest rate policy, which is currently at its lowest level of 3.50 percent.

BI Governor Perry Warjiyo himself had revealed that the central bank will only increase the BI rate after the movement of core inflation this year.

To note, the monetary authority has maintained the benchmark interest rate of 3.50 percent since 2020 with six gradual cuts of 150 basis points. So, will the Bank Indonesia Board of Governors Meeting in the middle of this month make a decision to raise the BI rate?