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fter seeing deflation for two consecutive months, Indonesia recorded a hike in the inflation rate in March on increases in the prices of fuel and rice following a sharp drop in the rupiah against the US dollar.

The Central Statistics Agency (BPS) reported on Wednesday that the consumer price index (CPI) increased by 0.17 percent in March month-on-month (mom), mainly as a result of the ongoing effect of last year'€™s rise in fuel prices and a recent surge in rice prices.

With the surge in the CPI in March, the headline inflation in the month accelerated to 6.38 percent year on year (yoy) from 6.29 percent in February. Meanwhile, March'€™s core inflation was recorded at 0.29 percent mom and 5.04 percent yoy.

BPS head Suryamin said increases in gasoline, rice and onion prices were among the six-highest contributors to March'€™s inflation rate.

The other commodities that experienced price increases in March were household fuels such as LPG, cigarettes and labor wages, according to Suryamin.

'€œGasoline was the main contributor to March'€™s inflation following a price increase on March 1. Fuel contributed 0.15 percent to the inflation rate,'€ Suryamin said at a press conference.

On March 1, the price of Premium gasoline was raised to Rp 6,800 per liter from Rp 6,700 because of a slight increase in crude oil prices. The government further raised the price of gasoline to Rp 7,300 per liter, beginning April 1.

Suryamin said an increase in onion prices as a result of the rainy season had prompted the commodity to become the second-largest contributor, with 0.1 percent, to March'€™s inflation. Rice was in third place with a 0.09 percent contribution to March'€™s inflation as a result of limited supply, as most regions have yet to start harvesting, which usually begins at the end of April.

BPS deputy head of statistics Sasmito Hadi Wibowo said the beginning of the harvest season next month was expected to prompt a decline in the price of rice of 2 percent, which would significantly affect April'€™s inflation rate. '€œDespite a hike in March'€™s consumer prices, Suryamin said 28 cities across the country still saw deflation, prompted by declining prices in a number of commodities as a result of bountiful supply, such as red chilies and broiler chicken eggs and meat.

Bank Danamon economist Dian Ayu Yustina said the inflation rate by the end of this year would depend on the government'€™s policies to secure the domestic food supply, while also pointing out that the weakening rupiah might put upward pressure on fuel prices, affecting the overall year inflation.

With the surge in inflation, the chance of the central bank lowering the interest rate would be slimmer, Dian said, adding that the inflation pressure would continue amid the weakening of the Indonesian
currency.

Meanwhile, Glenn Maguire, ANZ chief economist for South Asia, ASEAN and the Pacific, said inflation would likely stay around the same level over the next few months, with the start of the Ramadhan fasting month at the end of June. Demand for food traditionally rises during the Muslim fasting month.

 '€œOther components of inflation are expected to remain broadly in line with seasonal patterns. Pass-through from the rupiah'€™s depreciation will also be monitored,'€ Maguire said.