Bank Indonesia sees on-year December inflation staying at 18 percent with carry-over inflationary pressure from the recent fuel price increases and public spending during the Muslim holiday period as likely to abate within the month.“I expect year-on-year inflation this month (December) to stand at around 18 percent,” said governor Burhanuddin Abdullah on Tuesday after a meeting with House of Representatives Commission XI for financial affairs.
Burhanuddin refused to elaborate. However, his deputy Aslim Tadjuddin said that growth in consumer prices on a monthly basis may be slower in December, as compared to 1.3 percent in November.
“The impact of the recent fuel price hike and higher public consumption during the Idul Fitri holiday have all been counted in November. I expect those factors will no longer affect December’s figure,” said Aslim.
The year-on-year inflation rate skyrocketed to a six-year high in November at 18.4 percent, mostly as a prolonged impact of the government’s decision to more than double retail fuel prices on Oct. 1, and high consumer spending in relation to Idul Fitri.
As for next year, Aslim was optimistic that full-year inflation would decline to “8 percent plus-minus 1 percentage point.”
The central bank also highlighted its optimism over the rupiah, which it estimated would remain steady at between Rp 9.700 and Rp 9.800 against the U.S. dollar in the near future, due primarily to a declining dollar demand from state oil and gas company PT Pertamina.
“Our foreign exchange reserve is likely to stand at US$34 billion by the end of the year because the dollar demand from Pertamina to import fuel has significantly declined. The firm usually needs between $1.5 billion and $2 billion for monthly purchase,” said Aslim.
Still, the central bank warns that a fluctuation in the currency is likely to occur, probably during the first quarter of the year.
This is primarily due to the tight monetary policies applied by the U.S. Federal Reserves, which could attract investors into dollar-denominated assets, amid a sluggish inflow of foreign investment into the country’s real sector