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Rice yet again largest driver of inflation
Rice contributed more than any other commodity to rising consumer prices in October.
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Maintaining grain: Workers unload rice imported from Thailand at Ujung Baru seaport in Medan Belawan, North Sumatra, on Sept. 6, 2023.
(Antara/Yudi)
Rice once again contributed more than any other commodity to inflation in October, Statistics Indonesia (BPS) revealed on Wednesday.
BPS official Pudji Ismartini said the staple food accounted for 0.58 percentage points of the annual consumer price index (CPI) growth of 2.56 percent recorded last month, a figure that marks an increase from the prior month’s unexpectedly low rate of 2.28 percent.
“The commodity rice makes up a very big portion of the CPI calculation, hence the impact on inflation when there’s a rice price increase,” said Pudji on Wednesday.
BPS data shows that retail prices for rice surged 19.12 percent year-on-year (yoy). The increase was even higher for unhusked rice, at 27.95 percent.
Even though inflation of 2.56 percent is well within Bank Indonesia’s target range of 2 to 4 percent, the central bank unexpectedly increased its benchmark interest rates by 25 basis points to 6 percent last month in what it described as a preemptive measure.
Higher interest rates generally weaken consumer demand in an economy and bring down prices as a result.
However, Pudji noted that higher interest rates would have only a limited effect on rice prices, given that the absence of widely accepted substitutes in Indonesia made rice an inelastic commodity, one where price changes have relatively little effect on demand.
