Analysis of the Influence of Interest Rate, Rupiah Exchange Value, Household Consumption, and Import on Inflation in Indonesia Period 2010.Q1 - 2018.Q4

Abstract

This study aims to analyze the effect of the interest rest, the exchange rate of the rupiah, and imports on the inflation in Indonesia. The study used multiple regression equation by using secondary time series. Data from 2008.Q1-2018.Q4. The results showed that the interest rate of SBI, exchange rate of rupiah against US Dollar, private sector household consumption, and the total imports of Indonesia had a simultaneous impact on the inflation in Indonesia. However, partially only the interest rate of SBI and total imports of Indonesia had a significant impact on the inflation in Indonesia, respectivelyon the level ofα = 1% and α= 5%. These results mean that the increasing of interest rate of SBI and Indonesian import could impact the inflation rate in Indonesia. Based on the findings, the policy to control the inflation in Indonesia was Bank Indonesia as the holder of monetary policy needs to oversee the determination of business credit interest rate (micro, retail, and corporate), by commercial banks in order to maintain the rate on the stable and low levels. In addition, the government needs to compose the policy to reduce the dependence on imported goods by providing various facilities and incentives to increase the interest of entrepreneurs to invest in industries that produce imported substitute goods.