Inflation appears to have spiked in February,
ending a five-month streak of easing price rises, analysts say, with a steady
increase in prices likely as the government pushes ahead with plans to bump up
the price of subsidized fuel.
The consumer price index rose about 3.8
percent in February compared to a year earlier, three analysts contacted by the
Jakarta Globe forecast. The official figure will be released on Thursday. In
January, the year-on-year inflation stood at 3.65 percent.
Gundy Cahyadi, an economist at OCBC Bank in
Singapore, said the CPI would rise 3.8 percent, due in large part to the price
of rice, which has “risen by close to 20 percent since mid-2011.”
Citibank Indonesia economist Helmi Arman
penciled in a 3.8 percent February inflation rate.
He cited as a key cause of rising inflation
this year the government’s plan to increase the price of Premium, the widely
used subsidized fuel, by around a third in April in a bid to reduce the strain
of fuel subsidies on the state budget.
The price of the low-octane gasoline product
will rise by up to Rp 1,500 (17 cents) per liter from Rp 4,500 per liter, a
government minister said last week.
The government previously planned to prohibit
private vehicles from using Premium, but the plan met with resistance due to
the nation’s inadequate fuel-supply infrastructure.
“The impact on inflation will be greater than
the initial plan of rationing would have been,” Helmi said. “It will also be
broader-based across income groups.”
He estimated the subsidy cut would add 3.5
percentage points to inflation, bringing the 2012 year-end inflation to 7.2
percent, up from 3.8 percent last year.
He said the government’s plan to raise the
Premium price “will make [Bank Indonesia] more cautious on further cutting
rates.”
“However, rate increases do not look likely
either, in our view. The fuel price hike, if it goes through, will have a
one-off impact on inflation, which will dissipate within 12 months,” Helmi
said.
Bank Danamon predicted a 3.79 percent increase
in February’s CPI, but it has not changed its outlook on the central bank’s key
interest rate, which it forecast to fall to 5.5 percent this year, from 5.75
percent now.
“We haven’t factored in the fuel price
increase yet,” said Anton Gunawan, chief economist at Bank Danamon. “The
decision is not final.”
The central bank in February cut its key
interest rate by 25 basis point as it sought to stimulate the domestic economy
amid a global economic slowdown.
But Gatot Suwondo, president director of
state-controlled lender Bank Negara Indonesia, said on Tuesday that should
inflation accelerate, he expected BI to increase its key rate.
He said the key interest rate should be higher
than the level of inflation, referring to a textbook view that the value of
people’s money will be eroded if interest rate is lower than inflation. He said
inflation could rise to 6 percent this year and the BI rate could rise by 50
basis point to 6.25 percent by December.
Muhamad Al Azhari & Francezka Nangoy
Jakarta Globe
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