November inflation ‘quite worrisome’, says BPS

Indonesia’s Composite Price Index (CPI) rose above expectations at 0.6 percent in November, a trend that the Central Statistics Agency (BPS) considers worrisome as it gives little room for another inflation rise in December to meet the government and central bank’s full year target of 6 percent, a top official says.

BPS chairman Rusman Heriawan attributed the “quite high” inflation rate to increasing commodity prices such as the rise in prices of staple foods

“This is quite worrisome because it is possible that inflation will occur again in December, surpassing 6 percent [the central bank and government’s target],” he told a press briefing at the BPS office in Jakarta on Wednesday.

Rusman added that the inflation rate rose 5.98 percent from January to November of this year, just a little lower than the target. Year-on-year inflation did in fact breached 6 percent at 6.3 percent in November.

The central bank has forecast an inflation rate of between 4 and 6 percent in 2010, while the government targets inflation to reach 5.3 percent.

But, since the inflation rate went above the government’s target in November, both still hope it will not surpass 6 percent by year-end.

“Only a miracle could see the target met. It could happen, though, if deflation occurs next month,” he said, explaining that according to the 2009 trend, inflation reached 0.22 percent in December. “Based on last year’s figure, you can count it yourself.”

Core inflation, the index of items with volatile price movements such as food, reached 0.3 percent in November and increased 4.31 percent from the figure in November 2009. “Therefore, [the inflation] is mainly due to rising commodity prices,” Rusman added.

The increase in rice prices in November’s inflation was the biggest, contributing 0.12 percent to last month’s inflation rate, according to Rusman. Chili, gold and jewelry, cooking oil and clove cigarettes followed rice’s lead in terms of contribution to inflation.

“Meanwhile, broiler chicken meat prices decreased by about 3 percent and accounted for 0.05 percent of deflation.

“If broiler chicken meat prices did not decrease, inflation could have reached 0.65 percent,” Rusman added.

Bank Indonesia (BI) Governor Darmin Nasution, who expected the November inflation to be 0.5 percent, agreed with BPS, saying November’s inflation rate was indeed quite high and, therefore, the full-year inflation rate might exceed the central bank’s target, or be slightly higher than 6 percent.

BI has kept the benchmark interest rate (BI rate) at a record-low of 6.5 percent for more than 1.5 years despite the relatively high inflation during those periods. The higher inflation rate in November will put more pressure on the central bank to raise the key rate.

Rusman specified that the pressure would be high in January, especially if the government went ahead with its plan to limit sales of subsidized fuel to private cars. (est)