What we respond to is the propagation impact, if inflation affects fundamentals, where the indicator is core inflationJakarta (ANTARA) - Governor of Bank Indonesia (BI), Perry Warjiyo, has emphasized that BI's monetary policy, especially related to the benchmark interest rate, will not respond to the first impact of the current price increase.
"What we respond to is the propagation impact, if inflation affects fundamentals, where the indicator is core inflation," Warjiyo explained at a press conference held to share the results of the 2022 KSSK II Periodic Meeting here on Tuesday.
To cater to the possible impact, the Central Bank will keep the benchmark interest rate at the level of 3.5 percent until there are signs of rising inflation.
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Warjiyo did not deny that the current geopolitical pressure has increased the pressure on prices, especially food and energy prices.
However, the government and BI have continued to maintain food supplies and the Central Inflation Control Team (TPIP) and Regional Inflation Control Team (TPID) have continued to closely monitor and coordinate so that food stability is maintained and inflation remains under control at the level of 2.3 percent, which was recorded last month.
He explained that BI and the government will continue to monitor price pressures and the existing supply response, and that fiscal measures will continue to be taken in response to pressures from administered prices.
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The response of the benchmark interest rate to inflation is likely to be carried out simultaneously, depending on inflation conditions, with the current liquidity normalization measures that have been carried out through an increase in the statutory reserve requirement (GWM).
“So, the monetary policy in dealing with external conditions is through the stability of the rupiah exchange rate, the normalization of liquidity, and in the future, according to the inflation forecast, is to measure the benchmark interest rate, which, so far, we will maintain at 3.5 percent until there are signs of rising inflation," he said.
Hence, overall this year, inflation will still be within the target of 2–4 percent, he projected.
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Translator: Katriana
Editor: Fardah Assegaf
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