Since January 2015, inflation has consistently remained below Bank Indonesia's interest rate.

The difference between Bank Indonesia's (BI) benchmark interest rate and inflation widened again in May 2018, reaching 152 basis points (bps). This occurred after two Governor Board Meetings (Rapat Dewan Gubernur or RDG) in May 2018 raised the BI 7-day Reserve Repo Rate by 50 bps to 4.75%, while inflation last month fell to 3.23% (YoY). The widening gap between the interest rate and inflation increases the potential for real returns from this difference for depositors or investors.

As shown in the graph below, inflation has consistently remained below BI's benchmark interest rate since the beginning of 2015. In December 2015, the difference between the BI rate and inflation even reached 415 bps, with the BI Rate at 7.5% and inflation at only 3.35%.

The increase in fuel prices on March 1st and October 1st, 2005, caused inflation to surge above 17% in 2005-2006, exceeding the BI Rate, which also rose to 12.75% at the time. Inflation also surpassed the central bank's benchmark interest rate in 2008 during the global financial crisis and in 2013 when the government raised subsidized fuel prices by 44% in June 2013.