Bank Indonesia Keep Indonesia’s Inflation on Track

One of the greatest function of central bank is their monetary policy. Bank Indonesia as a central bank of Indonesia keep maintain the inflation in Indonesia using their monetary policy.

In the beginning of 2023, Bank Indonesia manage to decrease inflation in Indonesia, with relation to resource issues, Bank Indonesia's monetary policy tries to control prices on overall demand. Rapid inflation jumps brought on by temporal events that would pass eventually are not addressed by monetary policy, because market will do correction by itself.

Based on Bank Indonesia publication (2023) In January 2023, core inflation remained stable. Core inflation rate rose to 0.33% (mtm) in March, up from 0.22% (mtm) the prior month. Increased overall inflation in the beginning of year, caused mostly by real estate leases and rents, however it still in line with seasonal trends. In January 2023, core inflation was 3.27 percent by year to year less than the previous month which was 3.36 percent.

International market in general having increment in commodities prices, it also include countries that become Indonesia’s export destination. Nation Research and Inovation Agency (BRIN) (2002) research shows increment in energy price is the largest contributor in this worldwide inflation.

Setting inflation target also one of important role that conduct by Bank Indonesia, in the beginning of the year Bank Indonesia together with government set a inflation target that need to be achieve. The inflation target will be published, it gives businesses and the public guidelines for future economic activities on the other hand still aim of ensuring low and stable inflation. In order to achieve low and stable inflation is to set public expectations still on target that already stated in the beginning.

The Government and Bank Indonesia must collaborate and integrate in macroeconomic policies, which include sectoral, monetary, and fiscal policy in order to accomplish the inflation target since shocks might have an impact on inflation.

Reference:

BRIN Economic Study Team (2022) Indonesian economy in 2023 predicted positive, notes from Brin Economic Study Team, BRIN. Available at: https://brin.go.id/en/news/111239/indonesian-economy-in-2023-predicted-positive-notes-from-brin-economic-study-team (Accessed: March 1, 2023).

Erwin Haryono (2023) PRESS RELEASE: INFLATION DECREASING IN JANUARY 2023, BANK INDONEISA. Available at: https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_252523.aspx#:~:text=Annually%2C%20core%20inflation%20in%20January,yoy)%20in%20the%20previous%20period. (Accessed: March 1, 2023).