Governor of Bank Indonesia (BI) Perry Warjiyo gave the latest signal regarding the benchmark interest rate which is currently at its lowest level of 3.50 percent. According to Perry, the national economic condition is still conducive enough to continue the BI rate policy going forward.
The reason is that the current high inflation rate is said not to come from demand factors but rather to the volatility of food prices. It is also believed that the movement of core inflation is at a level that tends to be gentle and not as aggressive as inflation in the consumer price index (CPI).
In addition, government intervention in controlling prices for strategic materials also supports people’s purchasing power and keeps inflation within a safe range. “For now, we don’t need to raise interest rates because there were subsidies, there was food control, so from policy interest rates there is no need to rush to increase them,” he said through an online channel after being summoned by President Jokowi on Thursday, August 18.
Perry added that the monetary authority’s steps in holding the BI rate are expected to further support the national economy so that the recovery process can continue to accelerate properly.
“So that we can maintain economic stability. We are all together in the spirit of national unity to control inflation so that the economy recovers faster and stronger,” he said. It is important to note that one of the main references for Bank Indonesia in setting interest rates is core inflation.
In a release from the Central Statistics Agency (BPS) earlier this month, it was revealed that core inflation was at 2.89 percent in July 2022. This level is still lower than the BI projection which estimates it can penetrate 2.99 percent.
Bank interest rates is one of economic efforts to maintain economic stability. The wrong policy related to bank interest rates can cause foreign investor will stop or postpone their intention to invest in Indonesia. Bank interest rates can make bank installment rates high and it can bother economic wheels and downgrading the process of supply and demand. Last but not least, the high of bank interest rates is one of factor of political unstability and adding poverty level including crime tensions in Indonesia.
