Factors that affect inflation
(1) the rise in economic activity
The increasing economic activities prompted an increase in aggregate demand which is not offset by increased overbearing aggregate due to the structural constraints of the economic. Charge indicators will: still low capacity utilized the processing industry sector (39%-51%) and the decrease in the production of food crops (donation on GDP decreased 1.1%) in 2001.
(2) the Government’s policy in the field of price and income
Government policy in 2001, raising the price of goods and services such as fuel, electricity, water minimum and cigarettes as well as raising the minimum wage and salaried labor private civil servants expected CPI inflation provides additional $ 3.83%.
(3) the weakening Rupiah exchange rates
The strong influence of the depreciation of the exchange rate of the rupiah note of bank Indonesia research, among other things:
· The behavior of prices is likely to be easily increased due to the influence the weakening rupiah exchange rates
· The behavior of prices is likely to be difficult to go down when the exchange rate of the rupiah strengthened, as in August rose 4.0%, up 21.0% in July strengthened, but the price just went down (deflation) of 0.24%.
(4) the high inflationary expectations of society
High inflation CPI does not escape the influence of the inflationary expectations by manufacturers and traders as well as consumers.
The high inflationary expectations on manufacturers and traders throughout the year 2001 is mainly influenced by the high inflation in 2000 reaching 9.35%. Whereas the expectations of the consumers especially influenced by expectations of a rise in the price of goods controlled the Government and the expectations of the exchange rate of the rupiah.