Inflation still rising, peaking at 18.33 percent

Urip Hudiono, The Jakarta Post/Jakarta

Inflation maintained its steady climb last month as the October fuel price increases continued to affect prices across the board.

Year-on-year inflation in November was 18.38 percent, up from the October on-year inflation rate of 17.89 percent.

The Central Statistics Agency (BPS) reported on Thursday that inflation, as measured by the Consumer Price Index (CPI) as of November, stood at 17.17 percent for the year.

Monthly inflation in November, meanwhile, has eased down to 1.31 percent from its 8.7 percent spike in October.

"Inflation in November was due to an across-the-board rise in the prices of goods and services throughout the country, particularly on staple foods," BPS chief Choiril Maksum said.

"We are still monitoring the impact of the recent fuel price hikes on the inflation rate, particularly a second-round effect on the staple food prices, although its effect on transportation costs has eased."

Inflation skyrocketed in October to a month-on-month level of 8.7 percent and 17.89 percent on-year, after the government more than doubled the average price of fuel on the first day of the month.

It was the second time this year the government raised fuel prices, after introducing an average price increase of 29.9 percent on March 1, in an effort to rein in the massive fuel subsidy amid soaring global oil prices.

Choiril said higher food prices accounted for much of November's monthly inflation, with staple food prices rising 2.47 percent (accounting for 0.62 percent of the monthly inflation rate) and prices of processed foods, beverages, cigarettes and tobacco going up 2.06 percent (0.36 percent).

"The price of rice alone, for example, contributed 0.9 percent to monthly inflation, while a standard rice meal (a plate of rice and side dishes) contributed 0.16 percent," he said.

Public spending for housing, water, electricity and fuel rose by 0.64 percent, while transportation, communication and financial services costs eased 0.53 percent.

BPS' monthly inflation report summarizes the agency's month- long survey of 35 commodity prices in 45 major cities throughout the country, recording the movement of the prices as compared to their prices in 2002 as its 100-point CPI base.

Rising inflation, coupled with the central bank's policy of raising interest rates to maintain macroeconomic stability, could put in danger economic growth. The government has targeted 6 percent growth for 2005, but as of the third quarter the economy had expanded by 5.34 percent, down from 6.12 percent in the first quarter and 5.84 percent at the end of the second quarter.

With inflation in November rising to a six-year high, it could spell doom for the government's optimistic assessment that October's fuel-price-hike-triggered inflation was a one-time surge.

Though the government promised to stave off further rises in the prices of basic commodities through better distribution and market operations, BPS reported the only food prices that went down in November were cooking oil and sugar -- and those only by 0.01 percent.

The government has set an 8.6 percent inflation target for 2005. Bank Indonesia estimates full-year inflation will be around 17 percent and will remain in double digits at least until the second quarter of next year, before returning to single digits by the end of 2006.