Influence of Inflation in Indonesia
So inflation is a continuous increase in the price of living necessities. And what is called inflation itself is grouped into several groups based on the percentage increase, namely,
- Light inflation is inflation that occurs with price increases ranging <10% per year.
- Medium inflation, namely inflation that occurs with price increases ranging from 10% to <30% per year.
- Heavy inflation is inflation that occurs with the increase in prices ranging from 30% to 100% per year.
- Inflation hyperinflation that occurs with price increases above 100% per year.
# 1. Inflation Due to Demand Pull Inflation
# 2. Inflation Due to the Increasing Amount of Money in circulation (Quantity Theory Inflation)
# 3. Inflation Due to Increase in Production Costs (Cost Push Inflation)
# 4. Mixed Inflation (Mixed Inflation)
# 5. Inflation Because of the Structural Theory Inflation
What do you mean? Inflation that occurs due to population growth and is not accompanied by the ability to produce goods. So that demand is difficult to fulfill, which in turn increases the price of the item.
# 6. Inflation Due to the Increase in Fuel and Electricity Prices
When energy prices, namely the prices of fuel oil and electricity, experience an increase, inevitably all industrial sectors will increase the price of their products, including the price of food staples in traditional markets.
Why can this happen? Because Energy is the main factor that drives the wheel of production so that without fuel and electricity, it is impossible for the economy wheel to spin.
# 7. Inflation Because of Foreign Factors
These foreign factors will greatly affect the size of the State revenue (Foreign Exchange) because this is closely related to the number of Export-Imports to other countries. If we have good relations with a particular country and say that country is the main objective of export activities. And it turns out that the country has experienced an economic collapse and it is inevitable that our source of income will decrease.
And if these conditions continue to occur and we cannot overcome them, our cash money will experience a decline which in turn will bring bad effects, namely the economic crisis in our own country.
#B. Influence of Inflation in Indonesia
After we know what are the causes of inflation, we need to know what are the effects of inflation, especially in this beloved country of Indonesia, which we will see from various sides of business or business, especially the stock trading business and forex trading.
The following is a brief explanation of the influence of inflation in Indonesia,
Influence of Inflation from the Negative Side:
- With inflation, it is likely that the Central Bank will raise the benchmark interest rate to compensate for the inflation.
- Borrowing costs will be increasingly expensive because the Central Bank has raised interest rates. So if you have debt through the Bank or Leasing whether it is for mortgage fees, school fees, and or other costs then you must be prepared if your loan interest will increase.
- Refer points # 1, most likely the stock market will experience a correction. Why? if the benchmark interest rate increases, the company (issuer) that has a lot of debt will experience a decrease in income because the proceeds will be more to pay off debt. And contrary to the currency market, many investors will buy local currencies because of higher debt repayment rates.
- Food staple prices will be more expensive so we have to spend more than usual.
- Inflation is not suitable for Long Term Investors because inflation can reduce wealth whether in the form of savings, deposits, or debt securities.
- If the inflation is a hyperinflation group then it is likely that our lives will be destroyed because food prices are very expensive and of course the country’s economic conditions will be destroyed.
Influence of Inflation from the Positive Side:
- Your salary will most likely go up. If your company is a good company, then it is likely that your salary will increase as inflation increases every year.
- If you have a gold investment instrument, it is likely that the value of your assets will increase.