TEMPO.CO, Jakarta - Bank Indonesia (BI) has predicted that the inflation rate may drop to below 4.5 percent by the end of the year, which would still be higher than the central banks target of 4.1 percent.

Deputy Governor of BI Perry Warjiyo said on Monday that the 0.93 percent inflation in July, which would be 7.26 percent year-on-year, was the highest as compared to the rates recorded in the preceding months, due to Ramadan.

"In the past five years, the average inflation rate stood at 0.9 percent. So it was still relatively under control (in July). It is important that the value drop in the months to come so that by the end of the year, it can reach the target of 4,1 percent. We even believe that the rate will not be above 4.5 percent," he stated.

Initially, BI had predicted that the rate of inflation in July would reach 1.12 percent, but a value lower than the first forecast was recorded, Warjiyo added.

He also pointed out that the rate in July was relatively high because inflation in the month of Ramadan was usually high.

Nevertheless, this was anticipated well in advance, thanks to the cooperation between the government and the central bank of Indonesia.

"So far, coordination between BI and the Indonesian government has been good. Therefore, food prices this year have been lower as compared to those in previous years. But air and land transportation fares were higher," he remarked.

Moreover, Chief of the National Statistics Agency Suryamin had admitted earlier that the prices of food commodities and transportation fares were the main contributors to inflation in July.

"The prices of food commodities remained the biggest contributor to inflation, followed by transportation fares due to the holiday exodus seen after the fasting month," he explained.

Suryamin further noted that the hike in prices was spread evenly across food commodities, especially ahead of EId al-Fitr.

"The hike in the price of rice was not high and was relatively under control, even though there was no grand harvest. However, the price of other commodities increased before the fasting month and Lebaran festivities," he stated.

Furthermore, as a result of the 0.93 percent inflation rate in July 2015, which was the same as that in July 2014, the calendar year inflation rate will reach 1.9 percent, while the year-on-year inflation will be 7.26 percent.

ANTARA