The Central Statistics Agency (BPS) recorded that the inflation rate in July 2022 reached 4.94 percent on an annual basis. Several international pressures also put pressure on the inflation rate. To prevent inflation from continuing, Bank Indonesia was even asked to raise interest rates.
Head of the Central Statistics Agency, Margo Yuwono, said that the global food and energy crisis put pressure on domestic inflation, especially in the energy component.
Monthly, the inflation rate during this period was recorded at 0.64 percent (month-to-month/mtm), higher than the previous month’s 0.61 percent mtm. Although it continues to increase, he assesses that domestic inflation until July 2022 is still relatively stable.
“Indonesia’s annual inflation has experienced a persistent increase, but compared to some other countries, we are still doing better. The category is still safe,” he said at a press conference, Monday (1/8/2022).
In addition, he added, Indonesia’s inflation rate is also relatively lower when compared to several other G20 countries, such as the European Union which reached 9.6 percent, the United States at 9.1 percent, Britain at 8.2 percent, and South Korea at 8. 2 percent.
He said that this condition was reflected in inflation in the core components which was still under control at 2.86 percent YoY. According to him, the core inflation rate which was recorded at 2.85 percent was still relatively low.
“This illustrates that Indonesia’s economic fundamentals are still good,” said Margo.
Meanwhile, on an annual basis, Margo said inflation in July 2022 was the highest since October 2015, when inflation was 6.25 percent YoY.
On the other hand, the Economist of PT Bank Mandiri (Persero) Tbk. Faisal Rachma hopes that Bank Indonesia (BI) will raise the benchmark interest rates or the BI-7 Day Reverse Repo Rate (BI7DRRR) in line with the rising inflation rate in July 2022.
He estimates that inflation will increase substantially and fundamentally in the second semester of 2022, so it is necessary to anticipate the risk of inflationary pressure in the second semester of 2022.
According to him, inflation which is expected to continue to rise is mainly due to improving demand, following the easing of the PPKM which increases people’s mobility and the circulation of money.
“Thus, the core inflation trend is expected to continue to increase going forward,” Faisal said in a written statement, Monday (1/8/2022).
the government has decided to increase energy subsidies to contain inflation risk from administered price inflation. Nevertheless, Faisal highlighted that food inflation tends to remain high during global food security issues which are exacerbated by food restrictions by major exporting countries.
Faisal said that this could encourage food prices to continue to move up increasing the risk of inflation from fluctuating price inflation.
Then, he continued, Producer Price Index (PPI) inflation and Wholesale Price Index (WPI) inflation, which were already above CPI inflation, could also pose a risk for supply-side inflation through demand-side inflation.
Thus, Faisal estimates that the inflation rate will reach above 4 percent by the end of this year, around 4.60 percent.
