REPUBLIKA.CO.ID, JAKARTA -- Bank Indonesia has forecast that the rate of month-to-month inflation in March will be between 0.3 and 0.4 percent or higher than the initially predicted value of 0.27-0.3 percent.
The fuel price hike, effective Saturday, had contributed to the inflation although it only occurred four days ago, the central bank's Deputy Governor, Perry Warjiyo, stated here on Monday.
"The fuel oil component in the inflation was four percent, and as the fuel price was increased by Rp500 (per liter), the component was up 7 to 8 percent and when it timed 4 percent, it means its contribution was 0.04 percent. However, it would only happen in April," he explained.
Perry pointed out that the fuel price hike was caused by two factors: the rupiah's depreciation and the increasing global oil prices.
"The fuel oil price will be determined by developments and set bi-weekly," he remarked.
The deflation in January and February occurred since the global oil prices were still relatively low while the hike this time was caused by upheavals in the Middle East, he explained.
Perry said he could not forecast what the fluctuations in the fuel oil price would be in the future, but external conditions would still have a major impact on the global prices itself.
"It would all depend on the global oil prices. We do not know yet. It may go up or down. Now, it is up because of the situation in the Middle East that has also led to an increase in the domestic prices," he remarked.
Perry claimed that the mechanism to determine the fuel oil prices was better now as compared to that before, and therefore, the impact on inflation was smaller.
"We support the subsidy reform. Indeed, the fuel oil price hike may still happen, but it will be determined by external factors. This is a new mechanism, and the people have not yet become accustomed to it. However, later they will be. The essence is that its impact on the inflation will be smaller," he asserted.
The Indonesian government recently revoked the gasoline subsidy, and as a result, the price of gasoline may increase or decrease depending on the global prices.
The government however still retained the subsidy for diesel fuel and kerosene, but it was fixed at a certain amount.
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