Global inflation has had a significant impact on the Indonesian economy, affecting various sectors from production to public consumption. Considering that Indonesia is a country that is integrated in the global market, changes in prices of goods and services at the international level can cause quite large fluctuations in the domestic economy. One of the direct effects of global inflation is an increase in the price of imported goods. Indonesia, which relies on imports of raw materials for industry, such as food, energy and building materials, felt the impact when the prices of these goods increased on the world market. This price increase is generally followed by an increase in production costs, which in turn has the potential to trigger further domestic inflation. In addition, global inflation can result in the strengthening of foreign currencies, such as the US dollar. When the dollar strengthens, the rupiah exchange rate tends to weaken, so the price of imported goods becomes more expensive. The weakening of the rupiah has the potential to affect people’s purchasing power, especially for those who depend on imported goods. This can reduce domestic consumption, which is one of the main pillars of Indonesia’s economic growth. In the energy sector, an increase in world oil prices due to inflation can cause a spike in domestic fuel prices. The Indonesian government, which usually provides subsidies to control prices, may have to adjust its subsidy policies, potentially increasing the burden on the government budget and fueling public dissatisfaction. The agricultural sector is also not immune from the impact of global inflation. The increase in prices of fertilizer and agricultural equipment due to soaring international prices can reduce farmers’ profit margins. This has the potential to disrupt Indonesia’s food security and increase dependence on food imports. On the investment side, global uncertainty due to inflation can make investors more careful and tend to postpone or withdraw their investments in Indonesia. This change in investor sentiment could result in capital outflows, which could potentially weaken the foundations of the domestic economy. Meanwhile, Indonesia’s central bank, Bank Indonesia (BI), is in the midst of challenges when global inflation affects monetary policy. To control domestic inflation, BI may have to raise interest rates. An increase in interest rates can have a negative impact on economic growth because it affects borrowing and investment levels. At the macro level, global inflation can also have implications for Indonesia’s trade balance. An increase in the price of imported goods and a decrease in exports due to a decrease in demand in trading partner countries can increase the trade deficit. A sustained deficit could lead to risks to the country’s financial resilience. From a social perspective, the impact of global inflation is often felt by low-income groups who are most vulnerable to changes in prices of basic goods. Rising costs of living can lead to increased rates of poverty and inequality. Overall, global inflation is a serious challenge for the Indonesian economy, requiring an effective response from the government and economic actors to minimize negative effects and find sustainable solutions. Increasing international cooperation and economic diversification are important steps in facing the dynamics of global inflation.
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