Food Price Corrections trigger CPI Deflation - Bank Sentral Republik Indonesia
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May 25, 2019
No. 21/13/DKom
 
Headline inflation remains under control and within the 2019 target corridor of 3.5±1% in line with CPI deflation recorded in February 2019. The Consumer Price Index (CPI) experienced 0.08% (mtm) deflation in February 2019, upending the 0.32% (mtm) inflation recorded in the previous period. The main contributors to CPI deflation in the reporting period were deflation of volatile foods (VF) along with lower inflationary pressures on administered prices (AP). Annually, CPI inflation decreased to 2.57% (yoy) from 2.82% (yoy) the month earlier. Moving forward, Bank Indonesia will consistently maintain price stability and strengthen policy coordination with the Central Government and Regional Administrations to ensure low and stable inflation within the prevailing target range of 3.5±1%.
 
The prices of volatile foods are decreasing in 2019. Volatile foods experienced 1.30% (mtm) deflation in February 2019, reversing the 0.97% (mtm) inflation recorded the month earlier. VF deflation is in accordance with seasonal trends, yet the rate is deeper than the 0.66% (mtm) average posted in February over the past four years. Lower prices of red chillies, purebred chicken meat and eggs, shallots, bird’s eye chillies and carrots suppressed volatile food prices, while price pressures on rice, garlic and instant noodles were mild. Annually, therefore, VF inflation was recorded at 0.33% (yoy) in the reporting period, down from 1.76% (yoy) the month earlier.
 
Core inflation has trended lower, thereby controlling CPI inflation within the target corridor. Core inflation was recorded at 0.26% (mtm) in February 2019, decreasing from 0.30% (mtm) the month earlier. The main contributors to lower core inflation include house rentals, rice with a side dish, gold jewellery, motor vehicles and domestic workers’ wages. Annually, core inflation remains stable compared with conditions in the previous month, namely at 3.06% (yoy). Core inflation is under control thanks to policy consistency by Bank Indonesia to establish rational inflation expectations, while ensuring the rupiah moves in line with the currency’s fundamental value.
 
Inflationary pressures on administered prices were also mild. AP inflation stood at 0.06% (mtm) in February 2019 after recording 0.12% (mtm) deflation the month earlier. AP inflation was edged upwards by air fares, railway fares and filtered clove cigarettes. Annually, however, AP inflation was recorded at 3.38% (yoy), relatively unchanged from the 3.39% (yoy) in January 2019.
 
Jakarta, March 1st, 2019
COMMUNICATION DEPARTEMENT
 
Agusman
Executive Director 
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