Bank Indonesia Is Happy Inflation Back To Normal Level, 4 Percent Maximum

JAKARTA - Bank Indonesia (BI) positively welcomed the May 2023 inflation rate which was perched at the level of 0.09 percent on a monthly basis (month to month/mtm). This figure is sloping when compared to April 2023 which was 0.33 percent.

Head of the BI Communication Department Erwin Haryono said that with this development, general inflation or the Consumer Price Index (CPI) on an annual basis (year on year/yoy) was 4.00 percent, lower than the previous month's inflation of 4.33 percent.

"This development is inseparable from Bank Indonesia's preemptive and forward-looking monetary policy response as well as the close synergy in inflation control between Bank Indonesia and the central government, regional governments, and other strategic partners in the Central and Regional Inflation Control Teams (TPIP and TPID) through program strengthening The National Movement for Controlling Food Inflation (GNPIP) in various regions," he said in a written statement quoted on Tuesday, June 6.

According to Erwin, the decline in CPI inflation last month was influenced by a decline in core inflation. Core inflation was recorded at 0.06 percent (mtm), lower than inflation in the previous month of 0.25 percent (mtm).

"The development of core inflation is in line with the normalization of demand after the Eid al-Fitr period and the reduction in pressure on global commodity prices," he said.

Meanwhile, the main commodity contributing to the decline in core inflation mainly came from the clothing and footwear group.

On an annual basis, core inflation in May 2023 was recorded at 2.66 percent (yoy), lower than inflation in the previous month of 2.83 percent.

Erwin added, inflation for the volatile food group in May 2023 increased compared to the previous month's developments. He said, the volatile foods group recorded inflation of 0.49 percent (mtm), an increase compared to inflation in the previous month which was 0.29 percent.

It was stated that this development was mainly contributed to commodity inflation of shallots, purebred chicken meat, and purebred chicken eggs.

Then, further increases in inflation were restrained by deflation in various chili commodities. The volatile foods group experienced annual inflation of 3.28 percent (yoy), lower than the previous month's inflation of 3.74 percent.

Then, the administered prices group recorded a deflation of 0.25 percent (mtm), down from the previous month which experienced inflation of 0.69 percent. This development was influenced by seasonal patterns after the Eid al-Fitr HBKN period, reflected in the deflation of air and inter-city freight rates in line with the normalization of fares after the Eid al-Fitr period.

Meanwhile, deeper deflation was restrained by inflation in filter clove cigarettes due to an increase in tobacco excise rates. On an annual basis, the administered prices group experienced inflation of 9.52 percent (yoy), lower than the previous month's inflation of 10.32 percent.

"Going forward, Bank Indonesia believes inflation will remain under control within the target range of 3 percent plus minus 1 percent in the remainder of 2023," concluded Erwin.