The Indonesian Central bank corrected the country inflation at the end of 2013 from previous estimate of 7.8 to more than 8.
“The current condition with increase in staple commodities prices and the education cost which had not been considered in previous estimate can drive inflation to above 8 percent” says the Central Bank Governor B Agus Martowardojo at the Supreme Court building after the inauguration of Central Bank Deputy on Friday (02/08/2013).
According to Agus the Central Bank will respond to this new estimate by issuing various policies which will be unveiled during the next Board meeting August 15, 2013.
One of the policies to slow down inflation is by providing sufficient staple commodities domestically to reduce the price. If this works the inflation is estimated to go down to 7.2 percent.
According to Statistical Centre record, July 2013 inflation is 3.29 percent, substantially higher than the Central Bank previous estimate of 2.7 percent. This is seen as the failure of the monetary and fiscal authority in stabilizing price.
Member of Parliament Arif Budimanta from PDI Perjuangan express disappointment at the number which he says a lot higher than the estimate. “We se the 3.29 percent inflation should not have happened, but the reality is the monetary and fiscal authority failed to keep price stability domestically” says Arif.
Arif also disagree if the Central Bank increase interest to control inflation. He said this will actually increase production cost which in turn will further increase the price of goods for consumers.
Meanwhile the Ministry of Trade Deputy Bayu Krisnamurthi says there are four factors that help driving the inflation upward.
“There are four factors that influence inflation number for June and July. Those are the Ramadhan period, school vacation, new school year and drought” says Bayu in Jakarta.
Ramadhan and school holiday tend to cause significant increase in consumption. “The new school year also shows purchase of new clothes, shoes and stationeries supplies” he added.
On the other hand, the current drought has resulted in decrease of agricultural products which in turn increase their prices.
The reduction of fuel subsidies which resulted in a higher fuel price at the pump also affected the inflation. However, Bayu convinced that this will all be better soon.
“Historically, after Ramadhan the inflation will decrease and the next harvest season in September is expected to falls during the rainy season which should help tame the inflation” he said.