BI Rate Yet to be Lowered Despite Low Inflation Rate: Economist

TEMPO.CO, Jakarta - Lana Soelistianingsih, a professor at University of Indonesia’s School of Econoics, said that it was not the time yet for Bank Indonesia to lower its reference rate (BI Rate) despite current low inflation.

“We need to confirm that the inflation will be stable. We also need to figure out causes of the declining rate,” Lana toldTempo on Tuesday, December 1, 2015.

Earlier, the Central Statistics Agency (BPS) reported that the inflation rate in November stood at 0.21 percent, which was the lowest this year. The November’s core component of inflation rate stood at 0.14 percent, and its yearly basis was at 4.77 percent. In addition, the year-on-year inflation rate stood at 4.89 percent.

According to Lana, November’s inflation rate was caused by last year’s fuel price increase and a decline in food prices.

Lana explained that the BI’s move to lower its rate would not be effective if the declining inflation rate was caused by a decline in food prices. Moreover, Lana added, the US Federal Reserve would hold a meeting to set its interest rate. Lana suggested the government should wait for The Fed’s meeting results.

“We should see market’s reaction first. I think there’s no harm to wait a little bit,” she said.

MAWARDAH NUR HANIFIYANI