MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, May 2022

The higher consumption due to the fasting month of Ramadhan and ahead of Eid-al-Fitr celebration coupled with the soaring commodity prices during the inflationary pressures have contributed to high headline inflation in April, with the highest contribution coming from volatile and food ingredients components. In contrast, energy prices were still manageable as the GoI continued to implement the energy subsidy and compensation as well as social protection, thus, people’s purchasing power maintained and core inflation remained relatively low. On domestic conditions, Indonesia continued to record positive growth in Q1-2022, supported by persistent domestic consumption, recovery in investment, and higher exports due to soaring commodity prices. The robust economic performance and surging commodity prices help manage the capital outflow during the Fed’s monetary tightening to fight the inflationary pressures. The favorable economic growth and manageable core inflation provide room for BI to maintain its policy rate at 3.50% in this month’s BI Board of Governor meeting.

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