Bank Indonesia (BI) Governor Perry Warjiyo confirmed that BI would be more careful in considering policies to maintain price stability, with the need to encourage domestic economic growth.
“One of the impacts of geopolitical tensions between Russia and Ukraine is the rising prices of global commodities, such as energy and food. Of course, it has an impact on domestic price developments,” Warjiyo noted in the announcement of April’s Board of Directors’ Meeting (RDG) results here on Tuesday.
Warjiyo also assessed the impact on prices will largely depend on the fiscal policy pursued by the government.
“What we have seen and included in our estimates is the price increase of non-subsidized goods, such as pertamax and others. From various assessments, there will be an explanation from the government and we continue to coordinate,” he noted.
To this end, he explained that the BI and government had continued to coordinate to measure how far the commodity prices increased, the extent to which the state budget will be utilized, and how far the impact on the government-regulated price, or administered price, would be.
Nevertheless, Warjiyo expects the impact of the soaring administered price to be lower as compared to normal conditions, as the output gap is still negative.
He said in that way, BI’s monetary policy response will be calibrated, planned, and communicated well if there is an increase in the core inflation rate.
According to Warjiyo, the monetary policy response could be an increase in the Minimum Mandatory Current Account (GWM) or probably increasing the benchmark interest rate, but it will still depend heavily on the government’s policy, especially those that have implications for administered prices.
The increase in administered prices is influenced by the inflation of household fuels and gasoline due to the price adjustment of non-subsidized LPG and fuel (BBM) as well as air freight/transportation prices in line with the increasing public mobility.
Source: Antara News