Indonesian Central Bank Revises Downward Inflation Target This Year

Jakarta, 21 Muharram 143/22 October 2016 (MINA) – Bank Indonesia (BI), the central bank, has trimmed its inflation target this year as domestic demand remain subdued amid rupiah appreciation against U.S. dollar, deputy governor of the bank said here on Friday.

Perry Warjiyo, deputy governor of the bank disclosed that the lender expects consumer price index at 3.0 to 3.1 percent this year, lower than its initial estimate of 3.2 percent.

“The pressure from domestic demand is still weak. Strong rupiah appreciation against the greenback causes imported-inflation low,” he was quoted by Xinhua as saying at the Office of the Coordinating Minister for Economic Affairs.

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Rupiah has gained around 6 percent per one U.S. dollar this year and was traded at 13,020 o Friday, according to the bank website.

Relatively low global prices of commodities, the main Indonesia’s exported products, also factor to the weakening inflation, Warjiyo added.

Consumer optimistic views and expectation of economic condition slightly eased in September, indicated by fall of consumer confidence index, surveyed by the bank, to 110 in the month from 113.3 in August.

Core inflation, excluding volatile and administrated prices, reached 3.21 percent in September from a year earlier, falling from with 3.32 percent in the previous month, the Central Statistic Agency (BPS) has revealed.

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For next year, the central bank also trimmed its inflation forecast to 3.5 percent from the initial forecast 3.6 to 3.7 percent, said Warjjiyo.

Extreme weather and implementation of electricity tariff hike-plan next year are expected to contribute to the acceleration of the consumer price index in 2017, according to Handri Adwilaga, assistant director at department of economy and monetary at the central bank.

“In 2017, inflation is predicted to increase as, so far, rains fall earlier in most of areas in Indonesia. This will contribute to the shrinkage of food output,” he said.

The central bank has aggressively cut its basic rate for six times this year to support growth. On Thursday it trimmed its 7-day-reverse-repo rate 25 basis points to 4.75 percent.

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The government expects Indonesia’s economy to grow 5.2 this year and 5.1 percent for next year, amid contractions in other nations. (T/R07/R01)

Mi’raj Islamic News Agency (MINA)