BI Governor Perry Warjiyo stated while addressing central bank leaders at the 2018 World Bank-2018 Annual Meeting in Nusa Dua, Bali, on Wednesday that Indonesia had continued to control its inflation rate in accordance with the inflation target in the range of 2.5-4.5 percent this year.
"Inflation is forecast at 3.4 percent this year and at 3.6 percent next year," Warjiyo noted.
This year`s inflation projection is in the range below the inflation target.
BI has forecast that this year`s inflation rate will be lower than that in 2017 at 3.61 percent yoy.
According to the monetary authority, the decline in inflation rate is due to policy synergy between the authorities and government to maintain price stability, especially the price of commodities that are often volatile.
Warjiyo noted that achievements in the last few years could be an important asset for determining the realization of inflation at the end of 2018 and in the years ahead.
In 2015, the inflation rate was recorded at 3.35 percent yoy, at 3.02 percent yoy in 2016, and at 3.61 percent yoy in 2017.
With inflation kept low enough, Warjiyo noted that the Central Bank does not need to raise its 7-Day Reverse Repo benchmark interest rate.
However, the policy of raising rates must be taken, as the normalization of interest rates in developed countries must be responded to with the same policy.
"Indonesia is the first to raise interest rates, not because of its macroeconomic conditions but due to the global economy that has an impact on developing countries, especially related to capital flows," Warjiyo noted.
From May to September 2018, BI has raised its benchmark interest rate by 150 basis points to 5.75 percent.
Warjiyo remarked that the increase in the benchmark interest rate was aimed at ensuring that assets in domestic financial instruments remain attractive while reducing Indonesia`s current account deficit.
Indonesia`s current account deficit in the second quarter of 2018 reached three percent of the gross domestic product.
Reporting by Arief Pribadi
Editing by Andi Abdussalam
Reporter: Antara
Editor: Yosep Hariyadi
Copyright © ANTARA 2018
