Jakarta. Bank Indonesia warned that a strengthening El Nino phenomenon could disrupt food supplies and add pressure to inflation in the coming months, with rice, chili and shallots among the commodities being closely monitored.

The central bank said El Nino was expected to intensify through October 2026, particularly in eastern Indonesia, raising the risk of weather-related disruptions to agricultural production and food prices.

“We need to remain vigilant going forward, particularly against the risk of El Nino. It is expected to strengthen through October 2026, especially in eastern Indonesia, along with pressure from rising production costs,” Bank Indonesia Deputy Governor Ricky Perdana Gozali said at a virtual press conference following the central bank’s August policy meeting on Wednesday.

Indonesia’s consumer price index (CPI) inflation eased to 2.88% year-on-year in July, down from 3.34% in June and remaining within Bank Indonesia’s target range of 2.5% ± 1%.

Core inflation stood at 2.76%, while administered price inflation reached 3.58%, partly due to adjustments in the price of non-subsidized Pertamax fuel. Volatile food inflation also slowed to 2.52% as harvests of horticultural commodities, including various types of chili and shallots, helped boost supplies.

However, Bank Indonesia said the current moderation in food inflation could face renewed pressure as El Nino intensifies.

Ricky said the central bank and regional inflation control teams were closely monitoring supply chains for commodities vulnerable to the weather phenomenon.

“For El Nino, in particular, we will focus on rice, chili and shallots,” he said.

Bank Indonesia is strengthening coordination between the central and regional inflation control teams, known as TPIP and TPID, to cushion the impact of potential supply disruptions.

The strategy will focus on maintaining adequate food supplies and ensuring smooth distribution, Ricky said.

“We will continue to promote digital farming, precision agriculture, stronger post-harvest management and food downstreaming,” he added.

Other measures include strengthening interregional cooperation through business-to-business schemes, providing transportation subsidies and organizing low-price food markets. The interventions will be targeted at the right commodities, locations and timing, according to Ricky.

Economists have also warned that the peak of the dry season and El Nino could bring renewed inflationary pressure in the second half of the year.

LPEM FEB UI macroeconomics and financial markets economist Teuku Riefky said the dry season and El Nino were expected to peak in August and September, potentially reducing horticultural output in producing regions as drier conditions spread across a wider area.

Persistent pressure on rice prices could further add to inflation, he said.

“Although inflation eased in July 2026, inflationary pressures could increase in the coming months as the impact of El Nino intensifies,” Riefky said on Tuesday.

Dwi Andreas Santosa, a professor at IPB University's Faculty of Agriculture, similarly warned that strong El Nino conditions forecast between August and October could weigh on national food production.

“There is potential for production to decline for several food commodities,” Andreas said during an online discussion hosted by the Center of Reform on Economics, or Core Indonesia, on Friday.

Despite President Prabowo Subianto’s claim that Indonesia had achieved self-sufficiency in eight food commodities over the past year, Andreas said rice and corn remained vulnerable to the effects of El Nino.

“We are facing a less favorable situation with El Nino. In 2025, we were blessed with climate conditions that were favorable for agriculture, allowing us to plant throughout the year,” he said.

He estimated that rice production could decline by around 3-5% due to extreme heat, while corn output could also fall as the crop requires sufficient water.

Farmers typically plant corn during the second planting season after harvesting rice. But with limited water supplies, they may switch to crops with shorter growing cycles and lower water requirements, potentially further reducing corn production.

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