Indonesia’s central bank expects headline inflation to accelerate to 3.2 per cent next year due to higher global food and energy prices, its governor said on Monday, vowing to manage rising costs.

Perry Warjiyo made the remarks in a parliamentary hearing discussing the central bank’s budget for 2024.

The new forecast was higher than Bank Indonesia’s (BI) previous inflation expectation of 2.8 per cent for next year. It is also close to the upper end of the central bank’s 2024 target band of 1.5 per cent to 3.5 per cent.

BI expects inflation this year to come in at 2.84 per cent, within its 2023 target range of 2 per cent to 4 per cent, Warjiyo said.

The central bank unexpectedly raised interest rates to defend the falling rupiah exchange rate last month, taking its total rate hikes since August 2022 to 250 basis points.

Making no mention of potential further tightening, Warjiyo told members of parliament’s financial committee: “We will ensure monetary policies, whether through interest rate policy and the rupiah exchange rate, will support (efforts to) manage inflation.”

The rupiah exchange rate against the U.S. dollar will likely average 15,510 per dollar in 2024, compared with the 15,280 average expected this year, due to uncertainty in the global financial market, Warjiyo said.

The rupiah traded at 15,695 by 0800 GMT on Monday.

The governor also projected economic growth will come in at 5.00 per cent for 2024, roughly in line with its estimate for 2023, underpinned by spending for the Feb. 14 general election and construction of the country’s planned new capital city Nusantara on Borneo island.

Indonesia’s economy grew at its weakest pace in two years of 4.94 per cent in the third quarter, as exports shrank and household spending softened.

Growth in Southeast Asia’s largest economy was at a nine-year high of 5.3 per cent last year.

Source: Reuters