BI Explains Reasons for High Inflation in Indonesia at the Start of the Year

Jakarta, CNBC Indonesia - Bank Indonesia’s (BI) Senior Deputy Governor Destry Damayanti has revealed the reasons behind the rise in inflation at the beginning of this year. As is known, inflation in February and March 2026 reached fairly high levels of 4.76% and 3.48% year-on-year (yoy), respectively.

Destry acknowledged that this inflation rate has drawn attention from many parties, including economists. Economists, she said, view inflation as an illness that must be monitored. This is because inflation triggers many economic ailments, such as reduced purchasing power, high economic costs, and hindrance to economic growth.

“Inflation was indeed high above 4% in the last two months, but it was influenced by government subsidies two months in the previous year. This year, the government has discontinued electricity subsidies, so inflation rose due to the low base,” Destry explained at the Central Banking Forum 2026 themed ‘Indonesia’s Economic Resilience in Facing Global Exchange Rate Volatility’, held in Jakarta on Monday (13/4/2026).

Currently, BI observes that inflation is beginning to decline. In March 2026, core inflation remained relatively stable. Destry believes this condition indicates that Indonesia’s economic capacity is still ample. Meanwhile, she acknowledged that volatile food prices have made a significant contribution to domestic inflation.

However, the synergy between BI and the government through the National Food Price Control Movement has successfully suppressed volatile food inflation.

“Thus, food inflation has declined, and the overall trend in March shows a downward trajectory. This falls within BI’s inflation corridor of 2.5% plus or minus 1%,” said Destry.

Destry acknowledged that the government’s policy of maintaining prices for subsidised fuels such as Pertalite could have positive implications for strengthening the rupiah exchange rate.

This is particularly true as global crude oil prices are fluctuating due to conflicts in the Middle East between Iran, the United States (US), and Israel, which are disrupting one of the world’s main oil and gas routes, the Strait of Hormuz, allowing the government to ensure stable domestic fuel prices.

“The government’s decision not to raise fuel prices is positive for safeguarding the rupiah going forward,” she emphasised.