On a year-on-year basis, the inflation rate calmed to 6.65 percent from 6.84 percent in February amid harvest season period, with Bank Indonesia (BI) Governor Darmin Nasution signaling Friday the benchmark interest rate may be held as headline inflation is “heading downward”.
BPS chief Rusman Heriawan said red chili prices slid 30.5 percent, the biggest deflation contributor of last month at 0.23 percent. Rice is the second deflation contributor at 0.21 percent, with prices falling by 3.54 percent throughout March.
“We have suffered high prices on the previous months, especially at the end of 2010, so the prices level had already been high.
“Average prices of rice, for example, slid 30.54 percent in March to Rp 8,791 per kilogram. But in March of 2010, rice prices were at Rp 7,490 per kilogram on average. So although rice prices fell in March, the level and weight for consumers remained high,” Rusman told a news conference at his office in Jakarta.
Volatile food inflation, which previously pressured headline inflation to peak to a 21-month high as the food price index increased 18.25 percent in January, have eased to 15.17 percent on a year-on-year basis, as of March.
However, core inflation — which measures processed items and excludes volatile foods and government-determined prices and weighs almost 66 percent on the overall inflation calculation — increased to 4.45 percent year-on-year from 4.36 percent in February.
Darmin said the previous food prices increase late last year had translated into rising core inflation, but the recent downward trend of the volatile food prices in the past two months showed signs of lowering core inflation in the future.
“Supposedly, in one to two months the impact [of sliding volatile food prices] will appear. Let’s say if in these two or three months volatile foods continue to slide, then the core inflation will be affected,” Darmin told reporters at his office in Jakarta on Friday.
Fauzi Ichsan, senior economist at Standard Chartered Bank Indonesia, said the psychological level of core inflation was 5 percent.
“So compared to the 6.75 percent BI rate level, the core inflation has not been worrisome,” he told The Jakarta Post.
Lower prices, analysts say, were mainly due to positive prospects of harvest season and rupiah appreciation which has cheapened prices of imported products, especially commodities in the volatile food components.
As inflationary pressures from food prices have eased and core inflation remained manageable, analysts expected the BI to hold the benchmark rate at 6.75 percent in its upcoming April 12 policy meeting.
Inflationary pressures pose threats to the people’s purchasing power which in turn will affect economic growth in the domestic-consumption driven economy, challenging policy makers to impose measures to calm the pressures.
The central bank has said it will tolerate gradual rupiah appreciation as long as it is still in line with the country’s economic performance, in an attempt to lower imported prices and ease inflation. The rupiah touched a four-year high of about Rp 8,700 recently, gaining 3.2 percent so far this year versus its 4.4 percent gain throughout last year.
The government, on the supply side, has temporarily abolished import duties for 57 commodity items for one year from January, to ensure supply adequacy and to stabilize soaring prices at home.
From : The Jakarta Post
