Bank Indonesia: Core Inflation Rate May Increase If Fuel Prices Increase

TEMPO.CO, Jakarta - Bank Indonesia (BI) predicted that the core inflation rate will increase following the hike in food prices–both from within the country and abroad–and subsidized fuel prices.

"Core inflation and expected inflation rates are estimated to soar due to the increase in non-subsidized fuel prices and volatile food inflation, as well as rising inflationary pressure from the demand side," said Head of the BI Communications Department Erwin Haryono in an official statement quoted on Friday, September 2, 2022.

Previously, Statistics Indonesia (BPS) announced that the Consumer Price Index (CPI) in August 2022 saw a deflation of 0.21 percent on a monthly basis (month-to-month/mtm), while the annual inflation rate was 4.69 percent (year-on-year/yoy), or lower than the previous month's 4.94 percent yoy.

BPS recorded core inflation in August 2022 at 0.38 percent mtm, higher than the previous month which reached 0.28 percent. The increase was mainly attributable to commodity inflation in the education and house rental groups which were driven by increased community mobility and running economic recovery.

Meanwhile, the increase in core inflation was restrained by deflation in gold jewelry in line with global gold price movements. The annual core inflation rate in August 2022 was 3.04 percent, higher than the previous month at 2.86 percent, yoy.

BPS Head Margo Yuwono previously stated that the hike in fuel prices needs to be considered as it will trigger higher inflation in the future. Not only raising inflation in terms of the administered prices, the fuel price hike will also affect prices in other sectors.

"Because this commodity (fuel) brings a significant multiplier effect to the economy. If the price of fuel increases, it will increase prices in several other sectors which will have an impact on inflation," said Margo.

BISNIS.COM

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