Indonesia inflationary pressures seen easing through July, elbow room for fuel price hike | Sector data
(Insider Stories) – Indonesia’s inflationary pressures will likely ease in the months through July, providing room for the government if it wants to raise subsidized fuel prices, a central bank deputy governor said Friday.
The CPI, the main inflation gauge, may rise 5.6% in April on year but fall by 0.04% from the previous month, according to a forecast by Bank Indonesia Deputy Governor Perry Warjiyo forecast.
That would mark an easing from March’s annual inflation of 5.90%–a near two-year high and above the central bank’s 5.5% inflation target cap–and overturning an on-month increase of 0.63% last month.
“Shallot prices, although they remain high, are lower than the previous month while prices of chillies, garlic and gold have fallen,” according to Warjiyo, while “the deflation outlook in April is good news as it reinforces our view that food-driven inflation is manageable. It shows the government can resolve logistic disruptions.” Restrictions on some agricultural imports have driven prices of horticulture staples like onions and garlic in recent months, feeding through to broader inflation.
“We expect low inflationary pressures through July due to harvest season. Although policy to adjust fuel prices is in government’s hands, it’s better to do it when inflationary pressures are low,” he said.
The government is considering raising the price of subsidized fuel for cars to up to 7,000 rupiah a liter from IDR4,500 currently as the country seeks to keep its budget deficit below the 3% threshold. The government hasn’t provide any guidelines on when it will make a decision.
