Food Prices Prompt Another Period of Deflation in August 2020 - Bank Sentral Republik Indonesia
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October 02, 2020

No.22/67/DKOM

The Consumer Price Index (CPI) recorded another period of deflation in August 2020, decreasing to 0.05% (mtm) from 0.10% (mtm) deflation in July 2020. Recent developments are in line with low core inflation as well as deflationary pressures on volatile foods and administered prices. Annually, headline inflation stood at 1.32% (yoy) in August 2020, down from 1.54% (yoy) one month earlier. Moving forward, Bank Indonesia will consistently maintain price stability and strengthen policy coordination with the central and regional governments in order to control low inflation within the target corridor of 3.0%±1% in 2020.

Low core inflation in August 2020 was influenced by weak domestic demand due to the COVID-19 pandemic, policy consistency by Bank Indonesia to anchor inflation expectations as well as maintained exchange rate stability. Core inflation was recorded at 0.29% (mtm) in August 2020, edged up from 0.16% (mtm) in the previous period by gold jewellery (10.75% mtm) in line with international gold prices. Core inflationary pressures also stemmed from higher tuition fees in line with seasonal trends. Annually, therefore, low core inflation was recorded at 2.03% (yoy), down from 2.07% (yoy) in July 2020.

Volatile foods also experienced 1.44% (mtm) deflation in the reporting period compared with 1.19% (mtm) one month earlier. Lower volatile food prices were affected by weak domestic demand, adequate supply due to ongoing harvesting seasons at several production hubs, maintained distribution and low international food prices. In August 2020, purebred chicken meat, shallots, tomatoes and purebred chicken eggs experienced price corrections. Annually, volatile foods recorded 1.09% (yoy) deflation in the reporting period after posting 0.35% (yoy) inflation the month earlier.

Administered prices continued to experience deflationary pressures in the reporting period despite easing to 0.02% (mtm) from 0.07% (mtm) one month earlier. The main contributors to AP deflation were lower airfares as a result of ticket promotions to coincide with the Indonesian independence festive period. Meanwhile, the selling prices of various cigarettes increased on stronger demand. Annually, therefore, administered prices recorded 1.03% (yoy) inflation in August 2020, up from 0.70% (yoy) in the previous period.

Jakarta, 1st September 2020
Head of Communication Department
Onny Widjanarko
Executive Director

Information about Bank Indonesia
Tel. 021-131, Email: bicara@bi.go.id v

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