Institute for Economic and Social Research – Faculty of Economics and Business – Universitas Indonesia

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Macroeconomic Analysis Series: BI Board of Governor Meeting, December 2023

Wednesday December 20th, 2023

El-Nino still plays a major part in pushing inflation upward. Headline annual inflation climbed up to 2.86% (y.o.y) in November 2023. Contrary to the previous months, source of pressure of food prices shifted in November from rice to other commodities, such as red chili pepper, cayenne pepper, and onion.  While GoI has done a rather excellent job in managing rice price through import, further prompt policy response is urgently needed as El-Nino is disrupting other food ingredients supply adequacy. Energy price decrease also helped in managing the overall inflation rate of November 2023. On the external factor, the Fed’s decision to hold its FFR and additional foreign currency supply spurred by export proceeds from natural resources (Devisa Hasil Ekspor Sumber Daya Alam/DHE SDA) policy has bolstered the value of Rupiah, which was recorded at around IDR15,500 per USD in mid-December 2023. Currently, Rupiah is among the least affected currencies by global shocks throughout 2023. A rather manageable inflation figure and excellent performance of Rupiah during the last month put us in a view that BI should leave its policy rate steady at 6.00% in December 2023.

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