BI: Year-end Inflation will be High

TEMPO.CO, Jakarta – Bank Indonesia's (BI) survey on retailers said that prices in the coming six months will increase, driven by a high demand ahead of Christmas and New Year. The price expectation index until the year-end is at 136.9, up by 2.2 points compared to the previous month, the survey said.

Inflation in the next three months, or per September 2014, is expected to go down, the survey said, as public consumption declined with the end of Ramadan and Eid. The price expectation index for the next quarter stood at 138.3, down 11.8 points compared to last month.

Meanwhile, Armida Alisjahbana, chief of the National Development Planning Agency (BPPN), is optimistic that the year-end inflation rate could be below five percent. "This target must be achieved, because Eid is over and August inflation is lower than July's," he said, referring to the Central Statistic Agency's announcement of July's annual inflation of 4.64 percent.

University of Indonesia economist Lana Soelistianingsih said the new government must reduce the volume of food import in order to decrease the rate of inflation. "Dependence on imported food is still high, such as for salt. It should be reduced," she said.

In addition to high volume of food import, inflation is also driven by the electricity tariff hike, the restriction of subsidized fuel oil, and the rupiah depreciation.

TRI ARTINING PUTRI | JAYADI SUPRIADIN