Food Prices Trigger CPI Deflation in July 2020 - Bank Sentral Republik Indonesia
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September 18, 2020

No.22/54/DKom

The Consumer Price Index (CPI) experienced 0.10% (mtm) deflation in July 2020 after recording 0.18% (mtm) inflation the month earlier. The turnaround was prompted by persistently low core inflation, coupled with deflationary pressures on volatile foods and administered prices. Annually, therefore, CPI inflation in July 2020 stood at 1.54% (yoy), down from 1.96% (yoy) one month earlier. Bank Indonesia will continue to consistently maintain price stability and strengthen policy coordination with the central and local governments in order to control low inflation within the target corridor of 3.0%±1% in 2020.

Core inflation remained low in July 2020 at 0.16% (mtm), despite increasing from 0.02% (mtm) in the previous period on rising gold prices. Low core inflation manifested in several commodities, such as granulated sugar, ground coffee and onions, which recorded 4.23%, 0.36% and 5.05% (mtm) deflation respectively in the reporting period. In contrast, inflationary pressures on gold prices increased from 1.18% (mtm) deflation in June 2020 to 5.02% (mtm) inflation in July 2020 in line with the higher global gold price. On an annual basis, core inflation stood at 2.07% (yoy), down from 2.26% (yoy) in June 2020, with low core inflation influenced by sluggish domestic demand due to the COVID-19 pandemic, policy consistency by Bank Indonesia to anchor inflation expectations, low international commodity prices (excluding gold) and maintained exchange rate stability.

Volatile foods recorded 1.19% (mtm) deflation in July 2020 after recording 0.77% (mtm) inflation one month earlier. Deflationary pressures stemmed from lower food prices affecting various alliums, purebred chicken meat and rice. Deflation in July 2020 was also in line with compressed domestic demand coupled with adequate supply due to the recent harvesting seasons, uninterrupted regional distribution and low international food commodity prices. Annually, therefore, VF inflation stood at 0.35% (yoy), down from 2.32% (yoy) in the previous period.

Administered prices experienced 0.07% (mtm) deflation in July 2020 after recording 0.22% (mtm) inflation one month earlier. Deflationary pressures were primarily the result of lower airfares in line with the airlines’ strategy to reduce ticket prices. Conversely, intercity transportation fares and ridesharing fares increased along with the selling prices of various cigarettes. Annually, administered prices recorded 0.70% (yoy) inflation in July 2020, decreasing from 0.52% (yoy) one month earlier.

Head of Communication Department
Onny Widjanarko
Executive Director 
 
Information on Bank Indonesia
Tel. 021-131, email: bicara@bi.go.id
 
 

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