Fuel Price Decline Boosts Deflation by 0.35 Percent

TEMPO.CO, Semarang – The declines in fuel prices in early January 2015 has triggered deflation as much as 0.35 percent in Central Java, as well as declines in transportation tariffs and prices for other commodities. 

“It’s contradictory to the inflation rate in December 2014 that reached 2.25 percent,” Bank Indonesia executive director for Central Java Iskandar Simorangkir said on Wednesday, January 4, 2015. 

Bank Indonesia’s recent economic survey revealed that the deflation was also affected by prices of spice commodities, such as red chili, with a deflation rate of 0.34 percent; and cayenne pepper with 0.08 percent. Meanwhile, the inflation rate in Central Java was caused by the minimum wage increase and high demands for manpower.

Hesti Candra Sari, the head of financial access, small and medium enterprises, and communication division at Bank Indonesia’s Central Java and Yogyakarta chapter, predicted that the deflation would last until February with a relatively-low pressure.

“It’s in line with the fact that a number of risk factors are well-controlled,” Hesti said.

However, Hesti warned of other threats to the inflation rate, such as weakening rupiah exchange rate against the US dollar.

EDI FAISOL