Govt to take action on food prices to ease inflation

With analysts predicting that inflationary pressures will remain high in the mid term, the government is taking immediate action to stabilize the prices of staple foodstuffs to help hold back rising prices.

Minister of Trade Mari Elka Pangestu told reporters on Tuesday that her ministry would launch "market operations" to help reduce the prices of rice and sugar, which are the only main commodities the government can still directly control.

"Rice and sugar are among the major contributors to higher inflation. We will maintain the prices of these two commodities to prevent them from further stoking already high inflation," she said at the Presidential Palace.

Mari said that rice contributed around 8 percent to inflation in the price of the whole basket of goods used for measuring inflation, while sugar, if consumed directly, accounted for a lower percentage.

"As an intermediary product, the higher price of sugar will affect the food processing industry, which eventually could drive up the prices of other types of food. That is why sugar is among the key commodities covered by our monitoring program," said Mari.

The ministry would also cooperate with industry players to ensure that price hikes would be no more than was necessary to cover higher production costs.

The Central Statistics Agency reported last week that the average 126.6 percent fuel price hike had caused the country's Consumer Price Index (CPI) to increase by 8.7 percent in October from September, or 17.89 percent from October last year.

Inflation during the first 10 months of the year has reached a cumulative rate of 15.65 percent. Overall, year-on-year inflation is the highest in six years.

Mari said that factors that could lead to higher inflation in the near future included public expectation over a possible rise in electricity charges and higher wage demands. -- JP