Aditya Suharmoko, Jakarta – Consumer prices rose to a 19-month high in April, sending jitters over possible sluggish growth in the economy as the central bank is left with less room to cut interest rates to spur economic activities.
The Central Statistics Agency (BPS) announced Friday year-on-year inflation rose in April to 8.96 percent, higher than March's 8.17 percent.
Inflation during the first four months of the year accelerated to 4.01 percent, with some 0.57 percent in April, the agency said. The agency blamed higher kerosene prices as the main factor in fueling the soaring inflation.
Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said inflation was caused mainly by the government's failure to get consumers to switch from kerosene to gas for cooking.
Despite the government limiting the supply of kerosene in the market to encourage the use of gas, many consumers still opt to use kerosene because it is cheaper. But because of scarcity and high demand, the price of kerosene has skyrocketed by more than 100 percent in some areas.
The BPS also pointed to the rising prices of house rent, water, electricity, processed foods and tobacco products as other major contributors to the high inflation. However, the agency said a reduction in cellular phone rates managed to slow down the inflation by 0.21 percent.
The BPS carried out its survey in 45 major cities throughout Indonesia, 37 of which saw inflation. With the figure already standing at over half of the government's full-year inflation target of 6.5 percent, BPS chairman Rusman Heriawan has suggested that inflation will only continue to rise in the months ahead.
"Inflation will remain high in the next three months, judging from the low inflation in the same period last year," said Rusman.
Citing the example of the price of premium gasoline, he said a 10 percent rise in the price of the fuel in June would add 0.34 percent to the inflation rate for that month.
A 15 percent rise in the fuel price would add 0.51 percent to inflation, and a fuel price rise of 20 percent would see inflation increase by 0.68 percent. The unexpectedly high inflation rate is likely to force Bank Indonesia (BI) to slow down the reduction of borrowing costs for companies to start up new businesses or for expansion, thus undermining economic growth.
The central bank has cut its benchmark interest rate by 4.75 percent since May 2006 in a bid to fuel growth in the country's real sector, which is needed to help reduce the massive unemployment rate.
The benchmark rate has stood unchanged at 8 percent since last December. BI's board of governors is to meet next week to decide whether to maintain or adjust the rate.
The government has repeatedly said the soaring inflation was not unexpected, given that other countries are feeling the pinch of inflation, and it remains optimistic that economic growth can reach 6.3 percent this year.