El Nino Threat Looms, Government Must Take These Steps!
Jakarta, CNBC Indonesia - Chief Economist of PT Bank Negara Indonesia (Persero) Tbk (BNI) Leo Putera Rinaldy stated that the government currently needs to manage or control food inflation amidst the risk of extreme weather. This is because El Nino is expected to continue and potentially suppress food production.
"Now, if we look at the Nino Index from BMKG or, for example, Columbia University, the peak of El Nino is expected to occur in August-September, and this El Nino may still last until the first half of next year," he said during Power Lunch on Thursday (13/8/2026).
In addition, the government also needs to be wary of potential price increases originating from production costs. This is because there is a difference between consumer inflation, or the Consumer Price Index (CPI), and producer inflation, or the Wholesale Price Index (WPI).
"So, the pass-through of costs that we discussed earlier, if we look at our CPI inflation, it is below 3% year-on-year, but WPI inflation, which is a proxy for producer inflation, is now at 5.6%," he explained.
He continued that this gap signals that businesses currently prefer to absorb rising production costs so that the burden is not immediately felt by consumers. This step is taken as part of an effort to maintain market share, even though there is a risk that the margins received by businesses will shrink.
"However, it seems that their room to suppress margins further is already limited, so there is potential for a pass-through later to consumer prices," he explained.
Therefore, Leo considers that the government must strengthen stimulus from the supply side. This policy is urgently needed to maintain the availability and smooth distribution of food, including suppressing the rise in production costs in the private sector.
"So, this is what needs to be monitored, and earlier, why supply-side stimulus is important to ensure that the increase in production costs in the private sector does not pass through to consumer prices," he concluded.