BI Expects Controlled Inflation Amid Global Commodity Prices Slowdown

Source: Dimas Ardian/Bloomberg

Bank Indonesia (BI) has stated that core inflation will remain under control at around 3 plus minus 1 percent in the first half of 2023, after experiencing a limited increase in March 2023.

Head of Bank Indonesia’s Communication Department, Erwin Haryono, said that the Consumer Price Index (CPI) inflation will also return to the target range of 3 plus minus 1 percent starting from September 2023, after the end of the base effect of the subsidized fuel price adjustment last year.

“Bank Indonesia (BI) will continue to strengthen coordination with both central and regional governments in controlling inflation, including welcoming the National Religious Holidays period,” Erwin said in a written statement on Monday, April 3, 2023.

According to the Central Statistics Agency (BPS), the CPI inflation was recorded at 0.18 percent (month-to-month/mtm) in March 2023, which is not much different from the previous month’s inflation, which was at a level of 0.16 percent mtm.

In detail, the March 2023 CPI inflation was influenced by an increase in core inflation recorded at 0.16 percent mtm, an increase compared to the previous month’s inflation of 0.13 percent mtm.

The limited increase in core inflation is in line with the gradual increase in demand amidst the easing pressure of global commodity prices. The main commodities that contributed to core inflation were house contracts, household assistant wages, and gold jewelry.

Year-on-year, core inflation in March 2023 was recorded at 2.94 percent yoy, or lower than the previous month’s inflation of 3.09 percent yoy.

In addition, volatile food inflation remained under control. The volatile food group recorded an inflation rate of 0.29 percent mtm, which is stable compared to the previous month’s inflation rate of 0.28 percent mtm.

This development was mainly contributed by deflation in red chili and shallots. Meanwhile, rice, bird’s eye chili, and garlic contributed to inflation.