The Central Statistics Agency (BPS) reported the inflation rate in July 2025 at 2.37% on an annual basis. This inflation rate is still within the range of this year's inflation control target set by the government and Bank Indonesia (BI) of 1.5%-3.5%.
According to BPS data, the main contributing commodities to July inflation on an annual basis were gold jewelry at 0.46%; shallots at 0.18%; tomatoes at 0.16%; rice at 0.15%; and water tariffs of the Drinking Water Company (PAM).
BPS Deputy for Distribution and Services Statistics Pudji Ismartini at a press conference on Friday (1/8/2025) explained that annual inflation occurred due to price increases as indicated by the increase in most expenditure group indices.
- The food, beverage and tobacco group amounted to 3.75 percent;
- The clothing and footwear group amounted to 1.00 percent;
- The housing, water, electricity, and household fuel group amounted to 1.65 percent;
- The household supplies, equipment and routine maintenance group amounted to 0.52 percent;
- The health group amounted to 1.94 percent;
- Transportation group by 0.12 percent;
- The recreation, sports, and culture group amounted to 1.05 percent;
- The education group amounted to 1.95 percent;
- The food and beverage/restaurant supply group amounted to 1.86 percent;
- The personal care and other services group amounted to 9.00 percent.
While the expenditure groups that experienced a decrease in the index, namely: the information, communication and financial services group by 0.31 percent.
From the distribution of locations, the highest inflation rate in July 2025 was recorded in South Papua Province at 5.45%. The district with the highest inflation in July 2025 was Toli-Toli District.
Meanwhile, the lowest inflation was recorded in West Papua Province at 0.43%. The district with the lowest inflation was Karimun Regency at 0.40%.
Based on the forming groups, the core inflation position in July 2025 was at 2.32% on an annual basis. The amount of inflation in July 2025 in thevolatile foods group reached 3.82% on an annual basis. Meanwhile, inflation in July 2025 from theadministered price group reached 1.34% on an annual basis.
Executive Director of the Communication Department of Bank Indonesia (BI) Ramdan Denny Prakoso said that the maintained inflation rate is the result of the consistency of monetary policy and the close synergy of inflation control between Bank Indonesia and the Government (Central and Regional) in the Central and Regional Inflation Control Team (TPIP and TPID) through the National Food Inflation Control Movement (GNPIP) in various regions.
"Going forward, Bank Indonesia believes inflation will remain under control within the target range of 2.5% ± 1% in 2025 and 2026," he said on Friday.
Explanation of rising inflation
Bank Permata Chief Economist Josua Pardede explained the cause of the increase in commodity prices in July 2025.
"The spike in the food group was caused by disruptions in the supply of staples - such as rice, shallots, tomatoes, cayenne pepper, and fresh fish - due to crop failures triggered by the wet dry season. In addition, prices of cooking oil and ground coffee also saw a significant increase reflecting higher production and distribution factors," Josua told SUAR (2/8/2025).
In addition, the personal care and other services group experienced a sharp rise due to an increase in gold jewelry prices. Josua explained that the increase in gold prices is closely related to demand as a safe haven asset and fluctuations in global gold prices.
Given these conditions, he predicts that inflation until the end of 2025 will remain within Bank Indonesia's target range of 2.0% to 2.5%. However, he also warned that price increases concentrated in the food sector could put pressure on people's purchasing power, especially the lower middle class.
To maintain price stability and boost purchasing power, Josua proposed several strategic steps. He said, "The government needs to improve the effectiveness of strategic food reserve management through timely market interventions, such as market operations and the distribution of direct assistance to vulnerable groups, especially for volatile commodities such as rice, cayenne pepper, and shallots."
Furthermore, he noted that entrepreneurs can actively strengthen supply chains and distribution. He proposed technological innovations, such as the adoption of digital platforms, to improve logistics efficiency so as to reduce costs and stabilize prices in the market.
Retailer's strategy
The increase in the price of goods that reflects the pressure on purchasing power is also responded to by entrepreneurs in order to adapt to the current economic conditions. Chairman of the Indonesian Retail Entrepreneurs Association (Aprindo), Solihin, observed a shift in consumer behavior after big shopping periods such as Christmas New Year (Nataru) and Eid al-Fitr.
According to him, it is now entering the period of the new school year so that consumers prioritize spending on urgent needs, such as basic needs and school fees, resulting in a decrease in purchasing power in other sectors.
To face these challenges, retailers must adapt to changes in consumer buying patterns that are now more oriented towards low prices.
"Manufacturers and us as retailers must be quick to respond to prepare products that consumers are looking for. What are consumers looking for? Products that meet their needs but the lowest price, among others. So, we don't maintain one product that might be the market leader, but the price is quite high," he told SUAR (2/8/2025).
Not only price issues, the shift in sales mechanisms from offline to online or omnichannel is also a concern for entrepreneurs. Solihin explained the increase in online sales of fast-moving consumer goods category products, such as packaged food, beverages, personal care products, and household products. However, for online sales of fast-moving consumer goods (FMCG) products, the increase did not exceed that of other product categories, especially fashion.
Despite facing difficult conditions, Solihin remains optimistic. "At least we as entrepreneurs must be ready with a sense of optimism that there will be improvements in the economic level of the community in particular, so that purchasing power can increase, even though we know it is very difficult in these times," he said.
