indonesian inflation

Indonesian Inflation Hit New Seven-Year High After Fuel Price Hike

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Inflation in Indonesia rate has jumped by 3 percent since the start of October amid rising fuel and gas prices. It rose slightly below the 6.05% forecast in August from 6.85% in September. It rose from 3.06% in August to 4.2% in September.

“September inflation was 1.17%, the highest since December 2014,” BPS chief Margo Yuwono said on Monday, 3rd of October 2022.

Margo said Bukittinggi was the city with the highest rate of inflation, mainly due to rising fuel and rice prices.

The government raised subsidized fuel prices by up to 38% on September 3, 2022 in an attempt to rein in the 2022 state budget deficit.

Indonesia’s July Inflation Jumps to 7-year Highs

Inflation in Indonesia accelerated to a seven-year high of 4.94% in July, beating expectations and well above the central bank’s target range, but core inflation remained within its target range. Inflation in July was the highest since October 2015.

Excluding government-controlled prices and volatile food prices, core inflation was broadly in line with expectations at 2.86%, up from 2.63% the previous month.

Sample Report

indonesian inflation

Source: Statista

This statistic shows the average inflation in Indonesia rate from 1987 to 2021 and the projection to 2027. Indonesia’s average inflation rate in 2021 was around 1.56% compared to the previous year.

Indonesia: Central Bank Continues Tightening Cycle in October

In the October 19 – 20 monetary policy meeting, Bank Indonesia (BI) raised its 7-day reverse repo rate by 50 basis points to 4.75% from 4.25%, signaling the continuation of the tightening cycle. 

Market analysts had predicted the size of the rate hike. The bank also increased interest rates on deposit facilities and loan facilities by 50 basis points to 4.00% and 5.50% respectively.

Bank Indonesia mentions two reasons for this decision:

  • A progressive, preemptive and forward-looking approach to lower Indonesia’s hyperinflation expectations and bring the country’s core inflation back to Bank Indonesia’s target range of 2 – 4% by the first half of 2023
  • To stabilize the exchange rate in line with the underlying value of the rupiah in response to the widespread appreciation of the US dollar and heightened uncertainty in the international financial markets amid growing strong domestic demand.

3 Pillars to Strengthen Indonesia’s Economy and financial Sector

  • Expand financial demand and supply by improving access and use of financial services, expanding and improving the quality of financial market products, and mobilizing long-term savings.
  • Improve allocation of resources by the financial sector by promoting competition in the banking sector, strengthening bankruptcy laws, and consumer protection
  • Improve the capacity of the financial system to withstand financial and non-financial shocks by improving the effectiveness of financial sector oversight, enhancing crisis preparedness, and resolution framework, and promoting climate and natural disaster related risk management.

Also read: How Tax Works in Financial Technology Companies

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