BI says inflation target still attainable

The Jakarta Post, Jakarta

Bank Indonesia (BI) expressed optimism on Friday that inflation this year would still be within the 9 percent to 10 percent target level despite the fuel price hike policy.

Bank Indonesia Governor Sjahril Sabirin was also convinced that the government had carefully calculated the impact of its fuel hike policy on prices.

"It (the fuel price increase) will certainly have a temporary effect, but not in the long term. So inflation will still be okay," Sjahril told reporters on Friday.

He was speaking during an inauguration ceremony of three new deputy governors of the central bank, namely Maulana Ibrahim, Maman Soemantri and Bun Bunan Hutapea. With the three on board, BI now has six deputy governors. The other three are Miranda Goeltom, Achjar Ilyas and Aulia Pohan.

The government raised fuel prices by an average of 22 percent Thursday, and starting March the price would be set monthly based on market prices in neighboring Singapore.

The fuel price hike was unavoidable to help ease the burden of the state budget.

Some economists earlier predicted that the new fuel hike policy could trigger steep increases in the prices of goods, sending inflation to a double digit level of between 12 percent and 13 percent.

Last year, the economy suffered a double-digit inflation of 12.5 percent, forcing Bank Indonesia to impose a high interest rate policy, which caused difficulties for the business sector hungry for bank loans and seeking debt restructuring deals.

Bank Indonesia has started to gradually lower its benchmark interest rate since the beginning of the month.

Separately, Minister of Trade and Industry Rini Soewandi also played down the inflationary threat fears, saying that the fuel price hike would only increase prices of goods by 4 percent to 5 percent.

Commenting on reports from consumers at marketplaces across the country, that the increase in commodity prices has gone up by more than five percent, she simply replied, "Our laws cannot impose sanctions on people who decide to raise their prices."

Bank Indonesia deputy governor Miranda Goeltom said that the current increase in prices was largely caused by the delay in the announcement of the fuel price hike.

The delay prompted some people to hoard fuel products and other goods, particularly rice.

The government was supposed to announce the fuel price hike earlier this month.

"If, in the future, we can prevent this kind of uncertainty again, I am convinced we will be able to control inflation," she said.