Indonesia Conference Directory

This study aims to analyze the response of inflation to changes in interest rates in Indonesia, thus analyzing the inter-relations between the two variables. The analysis uses the Granger Causality Test and Impulse Response Function approach to monthly time series data for the period January 2014 to June 2018, which includes Consumer Price Index, SBI Interest Rates, Interbank Money Market Interest Rates and Deposit Interest Rates. There is one-direction causality between the SBSBI and CPI. The government responded to the inflation rate by making SBSI adjustments this indicates the operation of monetary policy. The impact of changes in the SBSI to inflation rate lasted for six months. SBSI Adjustments are transmitted on the money market through deposits and credit. Changes in deposit and credit interest rates were responded to by inflation.