Dion Bisara & Fracezka Nangoy – Indonesia's inflation accelerated at its fastest pace in 20 months in February as consumers started to pay higher electricity bills and prices of some spices and vegetables rose on the back of supply disruptions and curbs on imports.

The consumer price index rose 5.3 percent on an annualized basis last month, after rising 4.6 percent in January, the Central Statistics Agency (BPS) said on Friday. That was higher than economists' consensus as surveyed by Reuters, which forecast inflation at 4.81 percent. February's figure was the highest since the 5.5 percent increase in June 2011.

The consumer price rise will not necessarily prompt Bank Indonesia to tighten monetary policy by raising its key interest rate, economists said. The central bank is due to hold its monetary policy meeting on Thursday.

Shares in consumer-related companies such as Unilever Indonesia and retail-store operator Mitra Adiperkasa fell on Friday amid concern higher prices will erode profitability, even as the benchmark stock index rose to a record high.

Sancoyo Antarikso, a director at Unilever Indonesia – the largest personal and home-care goods maker in the country, whose products include shampoo and soap – said the company had raised the prices of some its products. He did not identify those products.

"At Unilever, there is always adjustment from time to time. As of today, there are some prices of home care and personal care products that we have increased," Sancoyo told the Jakarta Globe.

Having said that, he said, whenever possible, the company always puts "optimization of cost efficiencies" before increasing product prices. "Inflation is always there, but as long as it does not spike sharply, especially on food inflation, I think it is fine," Sancoyo said.

Still, February's inflation rate almost exceeded the central bank's inflation target range this year of 3.5 percent to 5.5 percent. The inflation data "highlight the risks stemming from inward-looking policies," Citibank Indonesia economist Helmi Arman said in Jakarta on Friday.

The government was trying to mitigate deterioration in the trade balance, which slipped to deficit last year, by imposing curbs on imports such as food, mobile phones, electronics and textiles, he said. "These may help to curb import growth but that can take a further toll on inflation," Helmi said.

Costs of raw food last month climbed 10.3 percent from a year earlier, driven by higher prices of fresh produce such as garlic, tomatoes, onion and chili, as well as other fruits and vegetables. "This has to do with a series of regulations to tighten the importation of horticulture products," Helmi said in a research note.

Indonesia's Trade Ministry has halted imports of cabbage, carrot, chili, pineapple, melon, papaya and durian from January to June this year to prop up the price of local produce during harvest time.

The increase in electricity prices in January prompted landlords to raise their rents, BPS data showed. The government has pledged to this year incrementally increase electricity tariffs, aiming for a 15 percent increase across the year.

Without the volatile food and energy prices, core inflation eased slightly, to 4.29 percent in February from 4.32 percent in January, due to the decline in gold jewelry prices.

The slow gain in the core inflation rate is not likely to be enough for the central bank to raise its benchmark interest rate, which has been at a record low 5.75 percent since February last year. The core inflation rate matters more with fiscal and trade policy than with monetary policy.

"Although the language in upcoming statements may sound more hawkish, it may not be followed by a rate move unless the rise in non-core inflation starts to generate second-round effects to core inflation," Citibank's Helmi said.

He expects Bank Indonesia to maintain its overnight deposit rate, known as the Fasbi rate, at 4.0 percent, at next week's meeting. Central bank officials have repeatedly said that if core inflation stayed at below 4.5 percent, Bank Indonesia would not adjust monetary policy.

Low borrowing costs have helped encourage Indonesians to take out loans to buy goods such as cars and motorcycles. Private spending accounts for more than half of the nation's economic activity.

Fetty Kwartati, corporate secretary of Mitra Adiperkasa, which holds the franchising rights for international brands such as Zara and Sogo department stores, did not return calls or messages from the Jakarta Globe seeking comments on inflation.