Bank Indonesia prepares mitigation measures for inflation risk from El Niño
Bank Indonesia (BI) has prepared a number of inflation control strategies to mitigate the impact of the El Nino phenomenon on food price spikes until the end of 2026.
El Nino is expected to last until October 2026, particularly in eastern Indonesia. The condition has the potential to disrupt food production while increasing production costs.
“Of course we must remain vigilant going forward, especially regarding the risks from this El Nino. El Nino is expected to strengthen until October 2026 in eastern Indonesia, and will put pressure on production costs. Therefore, the inflation control strategy will continue to focus on supply availability and distribution smoothness,” said BI Deputy Governor Rizky Perdana Gozali at a press conference following the BI Board of Governors Meeting in Jakarta on Wednesday.
BI will pay attention to rice, chilli and shallot commodities, which are vulnerable to price pressure due to production disruptions.
A number of strategies prepared include the implementation of digital farming and precision agriculture, strengthening post-harvest handling and food downstreaming, as well as strengthening inter-regional cooperation based on food surplus and deficit.
BI will also optimise more mature food distribution facilitation, transport cost subsidies, and low-cost market movements based on the principles of the right commodity, right location and right time.
These measures are carried out through the Central Inflation Control Team/Regional Inflation Control Teams (TPIP/TPID), including through the Inflation Control and Prosperous Food Movement (GPIPS).
Rizky said that inflation control no longer relies solely on market operations, but is also directed at strengthening food production and distribution from upstream to downstream.
As is known, Consumer Price Index inflation in July 2026 was recorded at 2.88 percent year-on-year, easing compared with June 2026 which reached 3.34 percent year-on-year.
The decline was mainly supported by the volatile food group, whose inflation slowed to 2.52 percent year-on-year. This development was influenced by harvests of commodities such as chillies and shallots.
Nevertheless, BI remains wary of potential food price pressures in the coming period due to weather conditions.
On the same occasion, Acting Governor of BI Destry Damayanti confirmed that the central bank will continue to strengthen its monetary policy mix to keep inflation within the target of 2.5 percent plus or minus 1 percent in 2026 and 2027, including through rupiah exchange rate stabilisation to mitigate the impact of imported inflation.
“Bank Indonesia also continues to strengthen synergy with the Government through the Central/Regional Inflation Control Teams (TPIP/TPID) in implementing the Inflation Control and Prosperous Food Movement (GPIPS), to control food inflation including anticipating the risk of El Nino weather disruptions to food prices,” said Destry.