REPUBLIKA.CO.ID, JAKARTA - The Indonesian central bank, Bank Indonesia, will monitor the plan of the new government to raise subsidized oil fuel prices by the end of 2014.

"Bank Indonesia (BI) will keep monitoring the certainty of that plan. By the time we heard about the plan, we had created its simulation. We have been discussing the entire aspect related to inflation, economic growth, trade balance, deficit, monetary stability, and the financial system," BI's Deputy Governor Perry Warjiyo said on Friday.

Despite that, the plan to raise the price of fuel was not new, but BI had organized various simulations, as it might have a significant impact on inflation, Perry added.

"If the price rises by 3,000 IDR per liter, inflation will be around 3 - 3.5 percent, and the mid prediction is 3.2 percent. However, it will depend on the second and third round effects (after the price rise)," he explained.

The first round effect caused by the hike of subsidized fuel prices would include 1.5 percent inflation, while the second round effect would depend on the public transportation fares, Perry added.

"Our prediction is that the second round and third round effects will go to around 3 - 3.5 percent," he said.

The impacts of the subsidized fuel price hike would be significant during the first three months, and would return to normal in the fourth month, Perry added. "The plan to raise subsidized fuel prices is not something new, but BI will certainly anticipate it," Perry emphasized.

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