Sri Mulyani Says Inflation Is Still Low, Is It A Signal That BI Rate Won't Increase This Time?

JAKARTA - Minister of Finance (Menkeu) Sri Mulyani revealed that the inflation rate in Indonesia is still very low when compared to many developed countries, even in other developing countries.

“Last year, we experienced relatively light inflation at 1.6 percent. January and February we had a slight increase of over 2 percent. When compared to many developed countries or even other developing countries, this inflation rate is still very low," he said in a press statement quoted on Thursday, March 17.

According to the Minister of Finance, Indonesia will remain very careful with global commodity prices and supply disruptions, even before the Russian invasion of Ukraine which has created pressure on prices.

"It can be seen from the number of inflation rates in developed countries and several developing countries which have increased quite significantly and it will definitely have an impact," he said.

The Minister of Finance added that the response to monetary policy in many developed countries in terms of tightening and increasing inflation will affect purchasing power, so that it will affect the recovery driven by consumption. Both of these effects need to be responded to and anticipated.

For Indonesia, some of the increase in commodity prices has not yet been transmitted to consumer prices due to price policies regulated by the government.

"Our food prices are relatively stable, such as rice, which in the last two years has greatly benefited from the continuous rains and it has also become a buffer for us," he asserted.

For information, this statement from the Minister of Finance was delivered just a day before Bank Indonesia (BI) reported the results of the Board of Governors' Meeting which was scheduled to be published today.

If you look at the explanation given by the Minister of Finance, it is likely that BI will maintain the interest rate at 3.50 percent. This is because the current rate of inflation is still in the range of 3 percent plus minus minus 1 percent.

Based on information compiled by the editors, it is estimated that the BI rate increase will only occur in the middle of this year in line with the momentum of Ramadan which is usually accompanied by an increase in the price of basic goods.