What Is Inflation Risk? The Impact of the 200T Risk Mentioned by Finance Minister Purbaya

Inflation is a constant concern because it can impact the prices of daily necessities and people's purchasing power. Recently, Finance Minister Purbaya Yudhi Sadewa distributed Rp 200 trillion to banks.

This major policy immediately raises the question: will it trigger inflation risks?

We'll discuss what inflation risk is, how it works, and why this Rp 200 trillion policy is considered less harmful to price stability. Let's discuss it in simple language for easier understanding.

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What is Inflation Risk?

Inflation is a general and persistent increase in the prices of goods and services over a period of time. Inflation risk refers to the potential for price increases due to certain economic conditions.

This risk can come from increased demand, production costs, or too much money in circulation.

When inflation occurs, the value of money decreases. This means the same amount of money can buy fewer goods than before. Inflation risk is a significant concern for governments because it directly impacts public welfare.

Inflation is also measured by the Consumer Price Index (CPI). This figure reflects the average increase in prices of goods and services frequently used by the public.

By understanding what inflation risk is, we can see whether certain policies have the potential to increase prices significantly or not.

Finance Minister Purbaya Faces 200T Inflation Risk

Finance Minister Purbaya's policy involves placing Rp200 trillion in government funds in five state-owned banks. Bank Mandiri, BRI, and BNI each received Rp55 trillion, BTN Rp25 trillion, and BSI Rp10 trillion. The goal is to maintain liquidity and encourage credit distribution to the productive sector.

Some people worry that this policy could trigger the risk of inflation because money circulation increases.

However, economists assess the impact as relatively small. Indonesia's inflation projections for 2025 are only around 2.21 percent and 2.29 percent in 2026. These figures indicate that price stability is still maintained.

The reason is that the funds distributed do not immediately flow directly to consumption.

The funds are directed toward productive sectors such as housing, energy, transportation, and the food industry. As long as the distribution is targeted, the inflationary impact of this policy is very limited.

Factors Affecting Inflation Risk

Inflation risk doesn't just appear out of nowhere. Several factors influence it. First, demand for goods and services increases faster than production capacity. Second, increases in production costs, such as raw materials, energy, or labor wages.

Third, too much money circulating without being balanced by growth in goods and services.

Furthermore, inflation can also be triggered by external factors. For example, rising prices of imported goods due to a weakening exchange rate or rising global logistics costs. A state budget deficit can also increase the risk of inflation.

In the case of the IDR 200 trillion policy, the government attempted to control risk by channeling funds only to productive sectors. This way, money flowing into banks did not immediately flood the consumer market, thereby mitigating the risk of inflation.

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Impact and Control of Inflation Risk

The risk of inflation, if unmanaged, can be detrimental to society. Purchasing power declines, the cost of living rises, and economic uncertainty increases. Investors may also hold back due to uncertainty about future price conditions.

However, a reasonable amount of inflation can actually be healthy for the economy. Low inflation encourages a balance between consumption and investment. The challenge is how to keep inflation within the target range.

The government and Bank Indonesia play a crucial role through fiscal and monetary policies. Monitoring the use of the Rp 200 trillion (approximately US$10.6 billion) is key to ensuring it only flows to sectors that can increase production and employment.

If this works, the economy grows without creating the risk of high inflation.

Conclusion

Inflation risk is the potential for price increases that could reduce people's purchasing power. Finance Minister Purbaya's policy of channeling Rp 200 trillion to banks raised concerns, but analysts consider the risk to be small.

Indonesia's inflation is projected to remain stable at around 2.2 percent. This means this policy is more of a driver of economic growth than a trigger for significant inflation.

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FAQ

What is inflation risk?

Inflation risk is the potential increase in the price of goods and services due to changes in demand, production costs, or money circulation.

Why is the Rp200 trillion policy considered safe?

Because funds are directed to productive sectors, they do not directly encourage excessive consumption.

What is the inflation projection for Indonesia?

Inflation is expected to remain stable at around 2.21 percent in 2025 and 2.29 percent in 2026.

What are the main factors causing inflation risk?

High demand, rising production costs, excess money circulation, and rising import prices.

What is the impact of inflation risk on society?

Purchasing power is decreasing, the cost of living is rising, and it is creating uncertainty in investment and business.