TEMPO.CO, Jakarta - Governor of Bank Indonesia Hendar, said that the recent fuel price increase had caused the inflation rate target to be predicted at 7.7 percent and 8.1 percent, higher than the previous target set at 4.5 percent.
However, Hendar added, the pressure caused by the inflation rate would ease in 2015.
"We projected that the monthly inflation rate would return to its intended target by February 2015, or three months after the fuel price increase was implemented," Hendar said.
On the other hand, the government's policy to increase subsidized fuel prices would reduce the current account deficit and boost economic growth by fuel reallocating fuel subsidy.
Hendar claimed that Indonesia's financial condition would remain stable by the third quarter despite tight monetary condition. In addition, the bad credit ratio is predicted to remain low at 2.3 percent by September 2014. In the third quarter of 2014, capital adequacy ratio (CAR) was recorded at 19.4 percent, while banking loans grew by 13.2 percent.