This is Indonesia's Inflation Projection until 2024, Danareksa Version.

In its report, *Thematic Quarterly Outlook: Global Uncertainty and Domestic Economic Opportunities*, the Danareksa Research Institute (DRI) reveals that inflation poses a challenge to Indonesia's economic recovery.

DRI estimates that Indonesia's annual inflation rate will be in the range of 4.41%-4.68% in 2022, potentially increasing in 2023 and 2024, as shown in the graph.

According to DRI, the causes of high inflation this year include:

* Increases in administered prices due to rising unsubsidized fuel prices.
* Increased demand for public transportation coinciding with the Lebaran homecoming and the normalization of outdoor activities.
* Increases in volatile food inflation due to supply constraints caused by extreme weather.
* The increase in Value Added Tax (VAT) from 10% to 11% to increase tax revenue.
* Increased demand during the Ramadan and Lebaran periods.

Indonesia's annual inflation reached 4.35% year-on-year (yoy) in June 2022. This figure is the highest since June 2017 and is predicted to continue rising until the end of the year. It also exceeds Bank Indonesia (BI)'s inflation target of 3% (+/-1%).

At the BI Board of Governors Meeting held on June 22-23, 2022, BI decided to maintain its benchmark interest rate at 3.5%.

"Bank Indonesia is still maintaining the benchmark interest rate at 3.5% to support the momentum of domestic economic recovery. In addition, the fact that consumer purchasing power has not fully recovered is also causing the BI7DRR interest rate to remain unchanged," wrote DRI in its report.

DRI also predicts that BI will raise its BI7DRR benchmark interest rate once inflation reaches the upper limit of the target range.

This increase is also predicted to be a response to rising global interest rates, particularly the benchmark interest rate of the United States Federal Reserve (The Fed), which is expected to continue rising to the range of 3.25%-3.75% by the end of 2022.