Bank Indonesia Said Regarding Core Inflation Back Up: Staying Controlled

Board of Governors of Bank Indonesia (Photo: Doc. Antara)

JAKARTA Bank Indonesia (BI) admits that the core inflation rate increased last October to 3.31 percent year on year (yoy) from the previous 3.21 percent in September.

Head of the BI Communication Department Erwin Haryono ensured core inflation in October remained under control with a growth of around 0.16 percent on a monthly basis (month to month/mtm).

"Although there has been an increase, Bank Indonesia has not seen the strong pressure on inflation in terms of demand," he said, quoted on Wednesday, November 2.

Even so, Erwin said the central bank would continue to monitor along with the decline in the impact of further fuel price adjustments.

"Bank Indonesia is committed to lowering inflation expectations which are currently overshooting and ensuring core inflation in the future returns to its target of 3 percent plus minus 1 percent earlier, namely to the first half of 2023," he said.

To note, core inflation is one of the main benchmarks used by Bank Indonesia in setting benchmark interest rates policies. Core inflation was chosen because it reflected the strong demand from the public in real terms compared to general inflation or based on the consumer price index (IHK).

VOI noted that last August core inflation had passed a new psychological level perched at 3.01 percent. This then made BI raise the interest rate of 25 basis points (bps) to 3.75 percent.

The same attitude continued in September. At that time, core inflation shot to the level of 3.21 percent which made the central bank even more aggressive in raising the BI rate to 50 bps to 4.25 percent.

Thus, with the record that core inflation has advanced again to 3.31 percent in October, the space for monetary authority to raise interest rates will be even more open in the middle of this month.