Monday, 31 January 2011

Prediction of Inflation Jump Up

The Government and Bank Indonesia are alarmed by the inflation upshot in the next 2 to 3 months due to strong driving factors, which are electricity price increase, price increase of food, new school term holidays, the fasting month and Idul Fitri Festivities. “In the next 2 to 3 months inflation would be soaring up”, this was disclosed by acting Governor of Bank Indonesia Darming Nasution in Jakarta on Friday (9/7).

Darming explained that impact of the electricity price increase will directly or indirectly be felt in the next few months. “Made worse by the new school term factor, the fasting month, Idul Fitri, even airline tariff has gone up which means that inflation would soar up high in the next few months. Moreover increasing price of food will have its impact as well. However, price of food is predicted to inch down again by Quarter IV-2010. The inflation would be within Bank Indonesia’s projection of 5% with 1% plus or minus variables. As far as the monetary policy is concerned, it is not felt necessary to take any drasticaction”.

Meanwhile Head of the Board of Statistics (BPS) Rusman Heriawan stated that electricity price increase would contribute 0.2% increase to inflation. This magnitude was still exclusive of price increase in goods and services as reaction of the business world to the increase of electricity tariff. “Let’s say there is room for them to increase tariff but they have to bear the consequences and the pricing structure would be proportional. Let’s not les the electricity price increase trigger multi effects. This is what we expect” Rusman underscored.

About inflation projection the Ministry of Trade Mari Elka Pangestu stated that the Government was ready to anticipate price fluctuation such as price of red chili that the target of 5.3% for 2010 could be attained. “We have to anticipate whatever the inflation level will be: higher or stationary, we will know it by July and August because there are other influencing factors to consider like new school term, the fasting month, Idul Fitri, and impact of electricity price increase which is estimated to be 0.2% on inflation. That’s the direct impact, what is unknown is the indirect impact. The direct impact is the impact on the electricity price itself”.

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