TEMPO.CO, Jakarta - Bank Indonesia (BI) Governor Agus Martowardojo said Indonesia recorded inflation rate of 0.02 percent in the third week of August. The figure was taken from a price monitoring survey (SPH) conducted by BI.
He said that at that rate, the full-year inflation would hit 3.91 percent which would be below the inflation target of 4 percent set in the revised 2017 state budget (APBNP).
According to Agus, inflation rate remains under control at the level below BI’s expectation. The condition will help the government achieve the inflation target of 4 percent for 2017 and 3.5 percent for 2018. Inflation measured by consumer price index (CPI) in July was recorded at 3.88 percent (year-on-year/yoy).
Read: BI Keeps Inflation Target Below 4 Percent
Agus said that aside from stable inflation rate of the administrated prices sector, the inflation rate of the volatile food sector and core inflation were lower compared to the average inflation rate post-Eid al Fitr in the last three years. Core inflation year-on-year was recorded relatively low at 3.05 percent.
Agus said that low core inflation was caused by limited domestic demand, steady inflation expectation and a stable rupiah. “Going forward, inflation is predicted to remain low around the determined inflation target,” he said.
Lower inflation rate, Agus said, occurred as the supply was greater than the demand, a stable rupiah, decrease in global inflation and lower risk of an increase in administrated prices. “BI continues to coordinate with the government to keep inflation low.”
In line with low inflation rate, BI has decided to cut its benchmark rate, the 7-day reverse repo rate, by 25 basis points to 4.5 percent. Agus said that the new rate will be effective starting today. Moreover, the rate on the deposit facility has been slashed by 25 basis points to 3.75 percent and lending facility rate has been cut by 25 basis points to 5.25 percent. “The benchmark interest rate cut will be followed by lower interest rate on other monetary instruments,” Bank Indonesia Governor said.
ANGELINA ANJAR SAWITRI
