What type of inflation process is referred to in this news clip? Explain how the Indonesian central
Question:
What type of inflation process is referred to in this news clip? Explain how the Indonesian central bank’s decision to keep the benchmark interest rate constant could be effective in curbing the inflation.
Prices of foodstuffs, including essential items such as rice and milk, have risen in recent months, causing higher inflation rates in Asian countries, such as India, China, Thailand, and Indonesia. In Indonesia, food prices in January rose by 3.72% compared to the 2.78% rate of increase recorded in December.
Indonesia’s central bank has kept its benchmark interest rate steady as it believes that the rise in food prices, especially rice, is pushing the level of inflation.
It expects the coming rice harvest to increase supply and ease the pressure on food prices. An unexpected bad harvest, however, would pose serious problems for the government.
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