BPS Dispelled Code, Subsequent Bunga BI Almost Certainly Rises Again This Month

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

JAKARTA – The trend of increasing the benchmark interest rate of Bank Indonesia (BI) is believed to continue until the close of the year. This projection is getting stronger when the Central Statistics Agency (BPS) released information that there has been an increase in core inflation last month. Deputy for Distribution and Services Statistics, BPS Setianto, revealed that core inflation in October 2022 was 3.31 percent year on year (yoy). "The “ Level is higher than the position in September 2022 which was 3.21 percent year on year," he said when giving an explanation to the media crew on Tuesday, November 1. According to Setianto, core inflation contributed 2.18 percent to general inflation or based on the consumer price index (CP) which was recorded at 5.71 percent. "The core inflation is contributed by the rental of houses, cars, and house contracts," he said. The results of Setianto's elaboration are of course a strong consideration of the central bank in formulating inflation control policies. As is known, one way for BI to ‘ to tame ’ inflation is through adjustment of the benchmark interest rate. Just so you know, Bank Indonesia in September 2022 decided to raise the BI rate by 50 basis points (bps) to 4.75 percent. The decision to increase the interest rate as a front load, pre-emptive, and forward looking step to reduce inflation expectations which are currently too high (overshooting),” as stated by BI Governor Perry Warjiyo some time ago. This monetary authority move is classified as aggressive. Because market players previously estimated ‘Geng Thamrin ’ it would only raise the BI rate by 25 bps. However, it was later discovered that this strategy was taken because Bank Indonesia sharpened its target of reducing inflation from the previous third quarter of 2023 to the first half of 2023. " “Bank Indonesia uses the core inflation benchmark as the basis for the adjustment of interest rates because it reflects the strong demand in society," Perry said. So, will the central bank continue its aggressive attitude by changing the interest rate again this month in line with the swelling core inflation? The answer lies with the Board of Governors' Meeting (RDG) which will be held in the next two weeks.