JAKARTA The statement by the Governor of Bank Indonesia (BI) Perry Warjiyo who said that he would continue to make adjustments to the benchmark interest rate seems to be increasingly real. This step is intended to control inflation and maintain the stability of the rupiah exchange rate in the market.
The latest signal came from the Central Statistics Agency (BPS) which reported that there was an increase in core inflation to the level of 3.21 percent year on year (yoy) in September from 3.04 percent in August.
As is known, the central bank uses core inflation benchmarks as one of the basis for making policies on the BI rate.
"Bank Indonesia uses the core inflation benchmark as the basis for interest rate adjustments because it reflects the strong demand in society," Perry said some time ago.
The editor noted that this pattern began to be seen last July when BI did not budge with the benchmark interest rate of 3.50 percent because the core inflation rate was still 2.86 percent or below expectations of 2.9 percent.
A month later when core inflation rose to 3.04 percent, the central bank then responded by raising the benchmark interest rate by 25 basis points (bps) to 3.75 percent. Then, on September 22, Bank Indonesia again raised the BI rate of 50 bps to 4.25 percent.
Thus, with the current increase in core inflation to 3.21 percent, Bl's space to make changes to interest rates will be more open.
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