Indonesia’s central bank sees inflation peaking by the end of the year

The governor of Indonesia’s central bank said Wednesday ahead of a one-day monthly review of monetary policy that he sees no need for a tighter monetary policy adjustment while lowering the inflation outlook for 2022.

At a seminar organized by the National Assembly, he said Indonesia’s inflation rate of 5.95% in September, the highest since 2015, remains below price pressures in other countries.

He stressed that Bank Indonesia (BI) does not need to raise interest rates as aggressively as the U.S. Federal Reserve or other central banks.

The central bank has raised all key interest rates by 75 basis points so far this year. This is to ensure that inflation returns to the target level of 2% to 4% as the rupiah weakens.

Inflation in Southeast Asia’s largest economy skyrocketed after the government raised subsidized oil prices in September.

The BI lowered its forecast for headline inflation at the end of 2022 to 6.3%, down from 6.6% to 6.7% previously.

Core inflation is now expected to peak at 4.3% in late 2022 or early 2023, up from 4.6% in the previous forecast.

Inflation is expected to fall to around 3.5% to 3.6% by the third quarter of next year and further to 3% in the last three months of 2023.

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