Inflation outlook falls rapidly after BI hikes rates

Inflation expectations were falling rapidly after Bank Indonesia BI hiked interest rates aggressively four months ago, according to Indonesia's central bank governor Perry Warjiyo.

He told a central bank forum in Bangkok that the consensus forecast for Indonesia's inflation was at 6.9 per cent four months ago, but now is approaching 5.5 per cent, according to BI's own forecast.

After we aggressively responded through interest rates, the gap between consensus forecast and our forecast is narrowing, he said.

In the past four months, the benchmark interest rate has been hiked by 175 basis points.

Warjiyo reiterated BI's goal to lower core inflation back to its target range of 2 per cent - 4 per cent in the first half of 2023 and lower headline inflation to within target by the second half of next year.