TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

CPI target on track despite unexpected surge in April: BI

Bank Indonesia (BI) is optimistic its inflation-rate target remains achievable, despite the unexpected surge in the consumer price index (CPI) in April

Satria Sambijantoro (The Jakarta Post)
Jakarta
Tue, May 5, 2015

Share This Article

Change Size

CPI target on track despite unexpected surge in April: BI

B

ank Indonesia (BI) is optimistic its inflation-rate target remains achievable, despite the unexpected surge in the consumer price index (CPI) in April.

'€œOur inflation outlook for 2015 remains in the range of 3 to 5 percent,'€ BI senior deputy governor Mirza Adityaswara said Monday, describing the latest monthly inflation rate of 0.36 percent as better than the initial forecast of 0.44 percent.

'€œ[The rise in inflation] was caused mainly by administered price factors due to the adjustment in fuel prices in late March, with the policy'€™s impact fully felt in April,'€ he said. BI, which adopts an inflation-targeting policy stance, aims to bring inflation down below 4 percent by the end of this year.

Despite the inflation surge, the central bank was unlikely to change its monetary policy during its monthly board of governors meeting on May 19, analysts said. '€œWhile relatively high inflation in April is unusual, we do not expect Bank Indonesia to change its current monetary stance, as the excess inflation came mainly from outside core components,'€ Bank Central Asia (BCA) economists wrote in a research note released on Monday.

The country could see higher inflationary pressures in coming months, the report noted, citing the possible increase in food demand due to the fasting month of Ramadhan, as well as the possible increase in fuel prices.

'€œRisk on inflation is skewed toward the upside, judging from the recent rally in global crude oil prices and the weak rupiah,'€ noted Chua Hak Bin, an economist from Bank of America Merrill Lynch.

'€œBI will likely keep the policy rate unchanged at 7.5 percent for now, especially given the acceleration in inflation readings and due to the ongoing currency concerns,'€ he predicted.

The Central Statistics Agency (BPS) reported Monday that inflation hit 0.36 percent in April, raising year-on-year (yoy) inflation to 6.79 percent, higher than the 6.38 percent in March.

BPS head Suryamin noted the monthly inflation rate in April was the highest reading in five years, with price levels normally falling during the month due to abundant food supplies during the harvest season.

The surge in inflation was triggered by soaring transportation costs due to the adjustment in fuel prices, he said. Volatility in food prices declined, but prices of some crucial commodities, including shallots and rice, did not fall as steeply as expected, BPS data show.

In fact, shallot prices increased 11 percent last month, rising as high as 40 percent in some cities in Aceh, such as Meulaboh and Lhokseumawe.

Meanwhile, the price of retail rice fell by just 4.8 percent last month, despite the fact that the price of unhusked rice plunged by 8.7 percent, the BPS head noted.

'€œThis picture masks a strange situation, because the change in rice prices among farmers and sellers is normally by the same magnitude. This [phenomenon] might be driven by certain disruptive acts [taken by] some sellers,'€ Suryamin explained.

BPS data show that core inflation yoy '€” a measurement of long-term price levels '€” stood at 5 percent; volatile food inflation accelerated by 6.2 percent; and inflation of administered prices skyrocketed by 13.2 percent due to the adjustment of fuel prices, which drove up transportation costs in April.

At the end of March, the government hiked the price of gasoline to Rp 7,400 (56 US cents) per liter from Rp 6,900 in line with President Joko '€œJokowi'€ Widodo'€™s new fixed-subsidy scheme, where domestic fuel prices are adjusted every month based on fluctuations in exchange rates and global oil prices. Economists have warned the constant adjustment of fuel prices could create additional inflationary pressures in coming months.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.