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ollowing the increase in subsidized fuel prices implemented on Nov. 18, we expect November'€™s inflationary pressures to escalate. However, given the recent severe drop in oil prices, which should help to bring down other commodity prices, we expect inflationary pressures to be less severe.

Nevertheless, apart from the direct inflationary impact, we expect second-round effects to come from the fuel-price hike to lead to higher prices of staple foods, processed foods and beverages, as well as transportation costs.

Unfortunately, the Trade Ministry'€™s website no longer publishes staple food price information. However, based on prior fuel-price increases, we expect staple-food prices to rise by 1.2 percent month-on-month (m-o-m), as compared to 0.25 percent in October.

At this stage, we believe the November headline consumer price index (CPI) should rise 1.15 percent m-o-m, translating into a 5.86 percent year-on-year (y-o-y) increase (October: 4.83 percent). We also expect core inflation to increase to 4.38 percent y-o-y (October: 4.02 percent), mostly because of the indirect impact of higher subsidized fuel prices.

On the trade front, as shown in exhibit 2, October'€™s manufacturing export orders were slightly lower on weaker demand from key trading partners, as the global economic recovery remains unsteady. However, we expect October'€™s total exports to remain resilient, reaching US$15.31 billion, slightly up by 0.35 percent m-o-m (minus 2.3 percent y-o-y), mainly supported by a jump in palm oil exports (45.8 percent m-o-m).

Nonetheless, we expect October'€™s imports to be lower at $15.27 billion, contracting by 7.75 percent m-o-m (minus 2.6 percent y-o-y). This might have been caused by the expectation of higher fuel prices, resulting in weaker-than-expected raw material demand during the period. Thus, we believe the October trade balance will have turned into a slight surplus of $55 million (from a September deficit of $270 million).

After Bank Indonesia'€™s extraordinary board of governors (BOG) meeting, which resulted in a BI rate increase to 7.75 percent in response to escalating inflationary pressures, we expect the central bank to hold its policy rate at the next BOG meeting on Dec. 11.

The current BI rate level should be sufficient to manage inflationary expectations, particularly given the present backdrop of severely lowered commodity prices, pressured by plunging oil prices.