BI plays down inflation worries
The Jakarta Post, Jakarta
Bank Indonesia Governor Sjahril Sabirin said on Tuesday that this year's inflation target of between nine and ten percent was still attainable, despite the high inflation rate at the start of the year.
Sjahril also said that expected high inflationary pressure, caused by the current flooding in several parts of the country, was only temporary.
"So far, we believe that the (inflation) target that has been set before is still within our reach," he told reporters during a break from a hearing with the House of Representatives Commission IX on financial affairs.
The Central Bureau of Statistics (BPS) reported last week that inflation in January jumped 1.99 percent, and 14.42 percent year- on-year following the recent hike in fuel and electricity prices.
In addition, BPS warned that the floods would also put pressure on prices, as distribution of basic commodities would be disrupted.
This has raised concerns that the central bank's 2002 inflation target could be missed, which might force Bank Indonesia to once again raise its benchmark interest rate.
Over the past four weeks, the central bank has allowed the benchmark interest rate on its one-month SBI promissory notes to decline to around 16.9 percent.
The government and the cash-strapped business sector had been calling on Bank Indonesia ease the high interest rate environment.
But Sjahril said that there was no reason to halt the current declining trend in the interest rate.
"I think that things which only affect us in the short term should not create changes in the promissory notes" rate, he said.
He added that the increase in base money as a result of rising demand for cash due to the current floods should not pose a serious problem.
"The increase in the base money is not that much -- in fact, our base money currently stands at a lower level than our end-of -the-month target," he stated.
He was quick to add that the BI's base money target by the end of the month stands at some Rp 117 trillion (around US$11 billion).
By contrast, a senior official at the International Monetary Fund (IMF) called January's high inflation rate worrisome.
"That's a concern," said Daniel Citrin, the IMF's visiting senior advisor for the Asia Pacific department, who leads a review team in Jakarta.
Indonesian officials, he noted, "must try what they can."
He said that his team had yet to meet the central bank to discuss the issue of high inflation.