Bank Indonesia Boss Says Inflation Is Lower Than Target, Interest Rate Code Will Slope?

BI Governor Perry Warjiyo (Photo: Doc. Antara)

JAKARTA - Governor of Bank Indonesia (BI), Perry Warjiyo, said that several macro inflation assumptions showed that the realization was lower than the previous projection.

According to him, inflation based on the consumer price index (CPI) of 5.71 percent year on year (YoY) in October is still below the central bank's assumption that it will reach 6.1 percent.

“Previously BI estimated CPI inflation (in October) at 6.1 percent due to the increase in fuel prices. However, the realization is lower than that", he said on Thursday, November 3.

This condition of course brings fresh air to the CPI inflation expectations at the end of 2022 which is believed to also decline from the initial reading.

“At the end of the year, we initially estimated inflation at 6.6 percent. With this realization, it can be lower than 6.3 percent", he said.

Meanwhile, in terms of core inflation, which is the benchmark for Bank Indonesia in setting the benchmark interest rate, there was an increase.

Data from the Central Statistics Agency (BPS) informed that core inflation accelerated from the previous 3.21 percent YoY in September to 3.31 percent in October. Even so, this figure is again in the lower range of the central bank.

“Core inflation last October was only 3.3 percent. At first we estimated it could be 3.7 percent", he said.

He also assessed that core inflation also has a chance to reach a gentler level at the close of 2022.

"At the end of the year core inflation is estimated at 4.3 percent but with the current realization it could be lower than that", he said.

VOI noted that Bank Indonesia had raised the benchmark interest rate by 125 basis points (bps) in three consecutive months to 4.25 percent.

This move is said to have played a role in reducing inflation expectations which are now too high (overshooting) and ensuring future core inflation returns to the 3 percent plus minus 1 percent target earlier, namely into the first half of 2023.