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Indonesia plans measures to keep inflation low, protect purchasing power

JAKARTA: Indonesia is preparing policy packages aimed at keeping inflation low, protecting people’s purchasing power and supporting economic growth, its finance minister said on Monday (Oct 23).

Regulators will also conduct stress tests for the financial sector to ensure the sector remains healthy at a time of high market volatility, Sri Mulyani Indrawati told reporters after attending a meeting with President Joko Widodo, central bank chief Perry Warjiyo and other financial regulators.

“We have conveyed to the president that we will take measures to safeguard the economy, keeping inflation in check and ensuring stability in the exchange rate and the financial system,” Sri Mulyani said.

Measures to protect people’s purchasing power will be taken with regards to the impact of the El Nino weather pattern, she said, without providing further details.

Much of Indonesia has experienced drought in recent months, affecting harvests, with this year’s dry season expected to be the most severe since 2019, partially due to the return of El Niño.

Prices of foodstuffs like rice, chilli and sugar are soaring, even though the country’s headline inflation has stayed low.

Sri Mulyani’s comments came after the rupiah touched its lowest level since 2020 against the US dollar of 15,965 earlier on Monday, before paring some losses.

The currency has been steadily weakening for weeks as investors avoid risky assets amid US monetary tightening and rising tensions in the Middle East.

The Indonesian central bank last week unexpectedly raised interest rates to arrest the rupiah’s decline, with some economists noting further hikes are likely if the currency continues to fall.

Sri Mulyani said she will “synchronise” fiscal and monetary policies to mitigate risks from global developments.

Bank Indonesia (BI) head of monetary management Edi Susianto told Reuters earlier on Monday the bank has continued to intervene in the foreign exchange market to defend the rupiah.

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