The Jakarta Post
Bank Indonesia has said that low purchasing power was not behind the unusually low inflation of 0.21 percent during the month of Ramadhan.
BI economic and monetary policy director Raza Anglingkusumo said that low consumer purchasing power was usually marked by a decline in price.
“Inflation and prices is the interaction between demand and supply. If supply is strong, inflation is low. Meanwhile, low purchasing power is usually indicated by declining prices,” Reza said in Jakarta on Tuesday as quoted by kompas.com.
The Central Statistics Agency (BPS) announced on Tuesday that May inflation was 0.21 percent. Finance Minister Sri Mulyani Indrawati said this was the lowest inflation recorded during Ramadhan, which was usually saw inflation above 0.5 percent.
Reza said the central bank still recorded a price hike in a number of commodities, but it was controllable. He said that the balance between supply and demand for the primary commodities had contributed to the controllable inflation.
Consumer purchasing power could decline if a shortage in the primary commodities sparked a price increase, he added.
Reza also believed that a change in people’s spending behavior, due to the longer Idul Fitri holiday, had contributed to the low inflation in May.
“We are not seeing a decline in people’s purchasing power. The longer holiday could change the people’s spending habits. People may prefer to go to their hometowns to shop,” he said. (bbn)