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Indonesia central bank sees stronger inflation in 2024 as food, energy prices rise

CNA – Indonesia’s central bank expects headline inflation to accelerate to 3.2 per cent next year due to higher global food and energy prices, its governor said yesterday, vowing to manage rising costs.

Perry Warjiyo made the remarks in a parliamentary hearing discussing the central bank’s budget for 2024.

The new forecast was higher than Bank Indonesia’s (BI) previous inflation expectation of 2.8 per cent for next year. It is also close to the upper end of the central bank’s 2024 target band of 1.5 per cent to 3.5 per cent.

BI expects inflation this year to come in at 2.84 per cent, within its 2023 target range of two per cent to four per cent, Warjiyo said.

The central bank unexpectedly raised interest rates to defend the falling rupiah exchange rate last month, taking its total rate hikes since August 2022 to 250 basis points.

Making no mention of potential further tightening, Warjiyo told members of Parliament’s financial committee: “We will ensure monetary policies, whether through interest rate policy and the rupiah exchange rate, will support (efforts to) manage inflation.”

The rupiah exchange rate against the United States dollar will likely average 15,510 per dollar in 2024, compared with the 15,280 average expected this year, due to uncertainty in the global financial market, Warjiyo said.

The rupiah traded at 15,695 by 0800 GMT yesterday.

The logo of Indonesia’s central bank, Bank Indonesia. PHOTO: CNA