Bank Indonesia Reports Stable Inflation at 2.28% in September 2023, Thanks to Prudent Monetary Policies

Young woman traveler looking for some souvenir at Ubud market in Bali (photo: envato elements)

Bank Indonesia (BI) has reported that the achievement of inflation in September 2023 has remained within the expected range of 3.0±1 percent, a testament to the consistent application of monetary policy.

Erwin Haryono, the Head of BI’s Communication Department, elaborated on this by citing data from the Central Statistics Agency (BPS), indicating that the Consumer Price Index (CPI) for September 2023 showed a modest increase of 0.19 percent (month-to-month). This translated to an annual inflation rate of 2.28 percent, a noteworthy decline from the previous month’s inflation rate of 3.27 percent.

The stability in inflation is seen as a tangible result of the unwavering commitment to sound monetary policies and the close collaboration between Bank Indonesia and the Government, both at the central and regional levels. This collaboration is facilitated through the Central and Regional Inflation Control Teams (TPIP and TPID), further fortified by the National Movement for Food Inflation Control (GNPIP) active across various regions.

With this favorable development, Bank Indonesia is optimistic about its ability to maintain inflation levels within the target range of 3.0±1 percent for the year 2023 and 2.5%±1% for 2024.

Diving deeper into the numbers, BPS also highlighted the stability of core inflation, which remained low at 0.12 percent on a month-to-month basis. This figure is notably consistent with the previous month’s core inflation rate of 0.13 percent (month-to-month). Examining the annual data, core inflation for September 2023 stood at 2 percent, marking a decrease from the 2.18 percent rate recorded in the previous month.

Shifting the focus to the volatile food group, it is noteworthy that there was an increase in inflation from a deflation rate of 0.51 percent (month-to-month) in August 2023 to 0.37 percent (month-to-month) in September. This uptick was primarily driven by inflationary pressures in the prices of rice and beef.

However, it’s essential to highlight that this rise was offset to some extent by deflation observed in the prices of chicken eggs, various types of onions, and various types of chili peppers. On an annual basis, the volatile food group saw reach 3.62 percent, marking an increase from the 2.42 percent annual rate recorded in the previous month.

In the domain of administered prices, those influenced and regulated by the government, the data reflects an increase from a deflation rate of 0.02 percent to 0.23 percent (month-to-month). The primary drivers behind this shift were inflationary pressures in gasoline and filter kretek cigarette prices.

These changes resulted from adjustments in non-subsidized fuel prices and the ongoing transmission of tobacco excise tax increases. Examining the annual figures, it in the administered prices group continued to decrease, reaching 1.99 percent (year-on-year), which is notably lower than the 8.05 percent annual inflation rate recorded in the previous month.

Erwin Haryono underscored the influence of the conclusion of the base effect from last year’s subsidized fuel price adjustments in these trends.

As previously reported, BPS emphasized that the impact of the fuel price adjustments made in September 2022 continued to reverberate through inflation until August 2023. However, it ceased to contribute to it in September 2023. This comprehensive analysis of Indonesia’s inflation landscape highlights the intricate interplay of economic factors and the vigilance required to maintain price stability.