Inflation hits six-year high<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The average 126.6 percent fuel price hike last month has pushed
\ninflation to a six-year high of 17.89 percent for the year to
\nOctober, with unemployment also rising.<\/p>\n
Surging inflation has also prompted the central bank to
\nincrease its key interest rate sharply to 12.25 percent.<\/p>\n
Observers believe the worsening economic situation will put
\nmore pressure on the government's already beleaguered economic
\nteam prior to a possible Cabinet reshuffle.<\/p>\n
The Central Statistics Agency (BPS) reported on Tuesday that
\nthe country's Consumer Price Index (CPI) increased by 8.7 percent
\nin October from September, or up 17.89 percent from October last
\nyear. Inflation during the 10 months has accumulated to 15.65
\npercent.<\/p>\n
The figures are higher than Bank Indonesia's (BI) estimate of
\n5 percent inflation for October and surpassed its full-year
\nforecast of 14 percent.<\/p>\n
\"This month's inflation was particularly due to the rise in
\ntransportation and fuel costs,\" BPS chief Choril Maksum said.<\/p>\n
\"The rise in gasoline, kerosene and diesel fuel prices
\ncontributed to 3.47 percent of October's inflation, while
\ntransportation costs were 2.08 percent and the rest were the
\nusual inflationary pressures ahead of the Idul Fitri holiday.\"<\/p>\n
The BPS also reported that open unemployment in the country
\nhad increased by 1.3 million people from August last year to
\nOctober, reaching 10.84 percent of the country's 106.8 million
\nworkforce. The rise was likely caused by significant lay-offs in
\nlabor-intensive industries hurt by the fuel price hikes.<\/p>\n
In light of rising inflation, BI on Tuesday raised its
\nbenchmark BI Rate by 125 basis points to 12.25 percent,
\ncontinuing its recent rate hikes within the year to contain
\ninflation and a slumping rupiah.<\/p>\n
The rate hike caused the Jakarta Stock Exchange Index to close
\nlower 0.12 percent to 1,064.953, while the rupiah gained 0.3
\npercent to Rp 10,090 against the greenback.<\/p>\n
Upon hearing the BPS report, President Susilo Bambang
\nYudhoyono was shocked, presidential spokesman Andi Mallarangeng
\nsaid.<\/p>\n
\"President Susilo is very concerned with the inflation issue.
\nThe President and the economic ministers will take immediate
\nmeasures to ease the inflation,\" Andi said.<\/p>\n
Andi said Susilo had instructed Coordinating Minister for the
\nEconomy Aburizal Bakrie and economic ministers to seek a clear-
\ncut policy to contain the problem and to explain it to the
\npublic.<\/p>\n
Aburizal, however, played down the situation, saying he was
\nupbeat that October's inflation level would be a one-off event
\nand would ease within the year's remaining two months. He did,
\nhowever, admit that full-year inflation could reach 17 percent.<\/p>\n
The government's critics were quick to find fault with the
\neconomic team over the report.<\/p>\n
\"Inflation has gone way past the real increases in fuel
\nprices,\" said Rizal Ramli, who briefly served as chief economics
\nminister under president Abdurrahman \"Gus Dur\" Wahid.<\/p>\n
\"Prices were going up before and after the announcement of the
\nfuel price hikes. This is another example of the Cabinet economic
\nteam's incompetence and this adds to the burdens of the people
\nand the business world,\" he said.<\/p>\n
Rizal had been considered for a top post in the Cabinet last
\nyear before Aburizal, a former business associate of Vice
\nPresident Jusuf Kalla, was given the job at the last minute.<\/p>\n
Economist Dradjad Wibowo said high inflation could push the
\neconomy into another recession, blaming the government's decision
\nto increase domestic fuel prices during a time when inflation was
\nalready under pressure, and while the rupiah remained weak.<\/p>\n
\"The real sector will surely contract further (because of the
\ninflation), while unemployment could reach 11 percent,\" he said.<\/p>\n
\"This is proof that arguments justifying the fuel price hike
\nhave turned out to be wrong and that the economic team has lost
\nits credibility, if it ever had any.\"<\/p>\n
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