The Bank Indonesia (BI) board of governors announced Thursday it has decided to maintain the benchmark interest rate at 6.75 percent, as headline inflation has continued to slow in three consecutive months.
“Despite further deflation and with declining inflation, volatile food prices remained relatively high. On the other side, core inflation showed an upward trend,” the board said in a statement released after its monthly monetary policy meeting on Thursday.
Headline inflation slowed to 6.16 percent in April versus 7 percent at the beginning of the year, as a result of volatile food prices, which have contributed the most to surging inflationary pressures.
However, core inflation, which excludes food and government-controlled prices and measures most items in the nation’s inflation basket, continued to increase, standing at 4.62 percent in April, slightly lower than BI’s 5 percent threshold. BI officials have signaled that the central bank will consider increasing rates if core inflation reaches the 5 percent level.
“Bank Indonesia will remain vigilant on several risk factors that could fuel inflationary pressures, including those from high international commodity prices, increasing demands, food security and distribution and the government’s fuel policy,” the board said.
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