Bank Indonesia Foresees 6 Percent Inflation Due to Fuel Price Increase

22 September 2022 19:17 WIB

TEMPO.CO, Jakarta - Bank Indonesia Governor Perry Warjiyo in a press conference held virtually on Sunday said that the increased prices of subsidized and non-subsidized fuel in Indonesia will have a greater effect on the prices of goods. This situation, he explained, is expected to cause inflation to rise.

“A Bank Indonesia research shows that the second round effects will last for at least 3 months, and because of this, this month will likely see increasing inflation,” said Perry on September 22. 

The high inflation prediction comes after the first-round effect impacted the tariff of public transportation, which leads to the aforementioned second-round effect. 

The Bank’s internal survey in September this year predicted a rise in inflation of up to 5.89 percent (YoY) and a monthly realization of 4.69 percent. Perry asserted that this month’s inflation will likely be the highest recorded inflation.

"The highest is, of course, is in this month, because of the direct impact of the price adjustment of subsidies and of course because of transportation fares,” he said.

In the next three months, Perry continued, the impact of inflation due to rising fuel prices will continue to be felt. Until the end of 2022, inflation will rise to a level of more than 6 percent due to an increase in fuel prices of 1.8 to 1.9 percent.

To reduce the potential for inflation, Bank Indonesia plans to carry out stronger policy synergies between the central and regional governments. The synergy is both from the supply side and the demand side with the goal to ensure inflation returns to its intended goal in the second half of 2023.

ARRIJAL RACHMAN

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