BI to help curb 2014 inflation at 7.7 percent

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Jakarta, Nov 27 – The countrys central bank, Bank Indonesia (BI) announced its plan to curb inflation in 2014 at 7.7 percent or at the lower limit of BIs previous prediction at 7.7-8.1 percent.

“We forecast that the inflation rate would hover between 7.7 and 8.1 percent. Of course, we are doing our best to achieve an inflation rate of 7.7 percent,” BI Governor Agus Martowardojo stated here on Wednesday.

The inflation rate in October 2014 reached 0.47 percent (month-to-month) or 4.83 percent (year-on-year).

The BI governor has forecast that the inflation rate in November would soar as a result of the hike in the prices of subsidized fuels.

“It is estimated to be in the range of 1.3-1.6 percent month-to-month,” he noted.

Until the third week of November, the core inflation was still maintained. But, he did not mention any figure.

Agus remarked that the BI should also be cautious about the inflation rate in December when it is expected to be high.

“Inflation in December can reach two percent,” Agus claimed.

The BIs inflation estimate of 7.7-8.1 percent in 2014 is higher than the government’s projection of 7.3 percent.

The subsidized fuel price hikes are expected to contribute 2.4-2.8 percent to the inflation rate.

Some 1.3 percent of the estimated 2.6 percent is a direct contribution due to the increase in the prices of subsidized fuel oils, while some 0.7 percent is an indirect contribution in the form of increased transportation cost and the 0.6 percent is a result of the food, services, and goods price hikes, he stated.

Agus has earlier noted that the BI was preparing itself for possible inflation risks after the government confirmed its decision to raise the prices of subsidized fuel oils.

“BI is fully prepared to respond and cooperate with the government to face the situation,” he stated.

Although the hike might lead to inflation, Agus hailed the government’s decision, saying that the inflationary impact of the hike would be felt only in the initial three months of the announcement.

“If the subsidy reform is carried out well and sustainable, we will no longer need to discuss the issue every year,” he added.