Bank Indonesia and Inflation - Bank Sentral Republik Indonesia
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July 21, 2017

The Inflation Target

 

The inflation target is the level of inflation that must be achieved by Bank Indonesia in coordination with the Government. Under the Bank Indonesia Law, the inflation target is established by the Government. In a Memorandum of Understanding between the Government and Bank Indonesia, the inflation target is established for three year period in a Decree of the Minister of Finance (KMK). In the KMK No.93/PMK.011/2014, the inflation targets established by the Government for 2016, 2017 and 2018 are 4%, 4% and 3,5% with ±1% deviation.

 

These inflation targets are envisaged as a benchmark for business and the public in conducting their future economic activities and in so doing bring inflation down to a low, stable level. The Government and Bank Indonesia are steadfastly committed to achieving the established inflation target through policy coordination that consistently tracks this target. One measure for inflation control to bring about low, stable inflation is the shaping and guiding of public inflation expectations towards the anchor of the established inflation target. (File Link: MoF Decree for the 2016, 2017, 2018 inflation target)

 

The inflation target is published on the Bank Indonesia website and sites owned by other government institutions, such as the Ministry of Finance, Coordinating Ministry for the Economy and the National Development Planning Agency (Bappenas). Before Act No. 23 of 1999 concerning Bank Indonesia, the inflation target was adopted by Bank Indonesia. However, after this law came into force, the inflation target has been established by the Government in a move to strengthen the credibility of Bank Indonesia.

 

Table: Comparison of the Inflation Target with Actual Inflation

 

Year

Inflation T​arget

Inflation Actual (%, yoy)

2001

4% - 6%

12,55

2002

9% - 10%

10,03

2003

9 +1%

5,06

2004

5,5 +1%

6,40

2005

6 +1%

17,11

2006

8 +1%

6,60

2007

6 +1%

6,59

2008

5 +1%

11,06

2009

4,5 +1%

2,78

2010

5+1%

6,96

2011

5+1%

3,79

2012

4.5+1%

4,30

2013

4.5+1%

8,38

2014

4.5+1%

8,36

2015

4+1%

3,35 

​2016 4±1%​ ​3,02
​2017* ​4±1%
​2018* ​3,5±1%
 
 

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