Inflation Hike Not To Automatically Pressure Rupiah

Jakarta (Antara Bali) - Bank Indonesia (the central bank/BI) Governor Darmin Nasution said a rise in the inflation rate as a result of the imminent fuel price hike will not automatically put pressure on the rupiah.

"The rupiah will not automatically come under pressure if the inflation rate increases as long as we can respond to it by issuing other policies," Darmin said after a working meeting with the House of Representatives (DPR) Commission XI here on Monday.

The Central Statistics Agency (BPS) has earlier said any Rp500 increase in fuel price would increase direct inflation by around 0.31 percent, and indirect inflation 1.5-2 times as much as the direct inflation.

"The inflation rate target of 4.5, plus and minus 1 percent is the government's agreement so the target will continuously be used. Whether or not the target can be achieved this year will later be explained to the public. But we cannot change the target without in-depth consideration," Darmin said.

He said BI itself had made inflation forecast based upon  the assumed increase in the price of subsidized fuel oils and a surge in global crude prices.

"We have made inflation forecast for each alternative policy. But we cannot make it known to the public now as the new price of fuel oils is still unknown. The process is still going on. Let's wait and see," he said.

The government is expected to revise upward the target of inflation rate for 2012 to 6-7 percent from 5.3 percent, and the rupiah's exchange rate against the dollar to Rp8,800-Rp9,000 from Rp8,800 due to a plan to increase the price of subsidized fuels.

BPS said earlier the monthly inflation rate reached a record low of 0.05 percent since 2007.(*/T007)