Inflation is Low in 2016 and in the Lower Limit of Bank Indonesia's Inflation Target

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1. Government Press Release Title : Inflation is Low in 2016 and in the Lower Limit of Bank Indonesia's Inflation Target Date : 03-01-2017 Data Source : ​Communication Department Contact : ​Contact Center BICARA : (62 21) 131 e-mail :bicara@bi.go.id Hits : 17 Description : Attachment : No. 19/1/DKom CPI inflation in December 2016 is recorded 0.42% (mtm), lower than the previous month of 0.47% (mtm). The inflation is primarily attributable to administered prices and volatile food, while the core inflation is recorded relatively low. Therefore, the overall CPI inflation in 2016 reaches 3.02% (yoy) and is in the lower limit of Bank Indonesia's inflation target, namely 4±1% (yoy). In December 2016, inflation of administered prices reaches 0.97% (mtm), higher than the previous month of 0.13% (mtm). Such inflation movement is primarily attributable to the increase in airfare and train fare in line with the holiday season and adjustment to the tariffs of electricity and non-subsidized fuel. In addition, pressure from inflation of administered prices is also boosted by the increase in filter clove cigarette price. For the whole year, administered prices record low inflation of 0.21% (yoy), supported by the decreasing world's energy price amidst subsidy reform in the form of adjustment to fuel price and electricity tariff. Inflation of volatile food in December 2016 is recorded 0.47% (mtm), decreasing from the previous month of 1.84% (mtm). Inflation of this component primarily comes from broiler chicken, cayenne chili, broiler chicken meat, rice, and garlic. For the whole 2016, inflation of volatile food reaches 5.92% (yoy), which is relatively low amidst symptoms of La Nina. The low inflation of volatile food is supported with maintained food supply, market operation by BULOG, and closer coordination between the Government and Bank Indonesia, among others through TPI and TPID, in boosting production increase and improving distribution. Meanwhile, the core inflation remains controlled at a low level, monthly and annually, of 0.23% (mtm) and 3.07% (yoy) respectively. Such low core inflation is boosted by limited domestic demand, weak external pressure, and improved inflation expectation. It also closely relates to the consistent policy of Bank Indonesia in maintaining exchange rate stability and directing inflation expectation. Going forward, inflation is estimated to be at the 2017 inflation target, i.e. 4±1%. Coordination of policies between the Government and Bank Indonesia in inflation control must be continuously strengthened, particularly relating to possible adjustment to the prices of some commodities in the administered prices group.
2. Jakarta , 3 January 2017 COMMUNICATION DEPARTMENT Tirta Segara Executive Director