BI: Year inflation may soar beyond 9 percent

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Thu, 05/08/2008 11:03 AM  |  Business

The Central Bank said Wednesday inflation would likely soar beyond 9 percent by the end of the year should the government raise fuel prices by an average 30 percent in June.

"This year, inflation will likely go beyond 9 percent ... Bank Indonesia (BI) needs to revise (the inflation target) up again," BI senior deputy governor Miranda Swaray Goeltom said.

Earlier this year, BI and the government set the inflation target at 5 percent (plus and minus one), before further revising the figure in the 2008 state budget to 6.5 percent.

On Tuesday, Finance Minister Sri Mulyani Indrawati said inflation might reach between 8.5 percent and 9.5 percent this year following the planned hikes, with monthly inflation in June reaching 2.7 percent, followed by 0.4 percent in July and 0.35 percent in August.

Monthly inflation in October 2005 reached 8.8 percent compared to the previous month after the government more than doubled fuel prices, bringing year-on-year inflation in October to 17.89 percent, with full-year inflation closing at 17.11 percent, according to the Central Statistics Agence (BPS).

In April this year, inflation soared to 8.96 percent from a year earlier, and reached 4.01 percent between January and April. BPS has said inflation will remain high in the next three months.

BPS chairman Rusman Heriawan said a 30 percent hike in fuel prices would add almost 1 percent to full-year inflation.

Market analysts have said inflation would reach double digits this year on the fuel hikes.

Danareksa Research Institute Chief Researcher Purbaya Yudhi Sadewa said the hike would add 2 percent to this year's ongoing inflation rate, while Standard Chartered Chief Economist Fauzi Ichsan said inflation would reach between 10 percent and 11 percent.

"Assuming the government will raise fuel prices in June, inflation will reach between 10 percent and 11 percent by the end of the year," said Fauzi.

The government is considering raising fuel prices by a maximum 30 percent, and has proposed increasing Premium gasoline from Rp 4,500 (48.77 US cents) to Rp 6,000, diesel from Rp 4,300 to Rp 5,500 and kerosene from Rp 2,000 to Rp 2,500.

The prices of Pertamax and Pertamax Plus gasolines in Jakarta have already been raised to Rp 8,750 and Rp 9,000, respectively, as of May 1, up from Rp 8,300 and Rp 8,600.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.