Inflation Control, Indef Economist: Government Must Maintain Price Stability And Supply Chain

Illustration (Photo: Doc. Antara)

JAKARTA - The increase in food and energy prices has pushed inflation up, even to an anomalous range for food inflation.

Therefore, the government is asked to control prices and supply chains in order to reduce inflation to a reasonable threshold.

INDEF economist Eka Puspitawati assessed that the government needs to ensure the availability of goods and pay attention to the psychological effects of the community.

According to him, this is the key to controlling inflation so it doesn't become an anomaly in society.

"The key is to keep it under control, apart from the efforts made by the government. Real efforts are being carried out, such as Market Operations, how to keep food and energy supplies available to avoid higher inflation, the government must be able to calm people's psychology," said Eka in Jakarta, Thursday. , August 11th.

Eka said, there is a term expected inflation or inflation that is driven from excessive expectations or feeling afraid.

If there is fear in the community, then the price will rise faster.

However, according to him, this fear is felt more by the private sector.

"People in general consume more of their domestic consumption. Imported goods have been massively destroyed due to international shocks. If the community has not been affected much, as long as it is not blown up. The businessmen are worried that it will affect the community," explained Eka.

In the next few months with the import restrictions, continued Eka, a number of entrepreneurs will have difficulty getting raw materials. Of course this will have an impact on their business.

Even so, Eka believes that inflation as a whole will still be controlled due to the movement of people.

“Inflation is still supported by the pull of demand, that people are still active, still producing, investing, can still be maintained. Because inflation on the one hand is worrying if it is not under control, but inflation is needed to push the production side,” he said.

Keep Production

Meanwhile, Executive Director of the Center of Reform on Economics (CORE) Indonesia Mohammad Faisal said market operations can help reduce inflation by streamlining distribution channels so that they are not long.

When the distribution channel is too long, said Faisal, it will affect the final price received by consumers.

“So it will help to suppress inflation. But how far? I think this is also a market operation, it is only one aspect from the distribution side,” he said.

However, the cause of inflation is not only in terms of distribution, but also from production.

Faisal said that there were many factors driving inflation. For example, such as food commodities based on international prices, such as wheat. When international commodity prices rise, automatically from upstream has gone up.

Likewise, domestically produced food commodities are not pegged at international prices.

These commodities are produced domestically and are in accordance with domestic prices, such as rice, chili and shallots.

"If it's a domestic problem, this also means a problem at the upstream as well, domestic producers. This means that the supply from upstream is lacking,” he explained.

When the cause of inflation is on the production side, said Faisal, then market operations will not mean much.

In fact, according to Faisal, currently inflation is caused more by production factors or the upstream side.

“Market operations are only meant to overcome inefficiencies in terms of distribution. Can it reduce food inflation prices? Yes you can, but only under certain conditions. But I believe that the one that has more influence at the moment is the upstream side," he said.

Previously, the Governor of Bank Indonesia, Perry Warjiyo, said that food inflation felt right for the small community. So the government's job is to control prices, reduce inflation to a reasonable threshold.

"So lowering 10.47 percent to six or even five percent is really a very big social impact for the welfare of the people," said Perry.

In July 2022, monthly food inflation reached 10.45 percent from the reasonable limit, which is between 5-6 percent.

For this reason, Bank Indonesia together with the Central and Regional Inflation Control Teams (TPIP & TPID) are committed to keeping national inflation under control.