Indonesia: Inflation rises as government battles to control prices

The inflation rate in May brought the annual inflation to 4.33% year-on-year.

Picture for representation
Picture for representation Reuters

Triggered by the spike in prices of major food commodities ahead of Ramadan, Indonesia's inflation rate stands at 0.39% month-to-month (mtm), said the Central Statistics Agency (BPS) today.

The Jakarta Post reported that the rise in prices for general household items such as garlic, chicken, eggs, rice and beef along with other costs including electricity, fuel, airline fares and cigarettes was triggered by the rising demand and the lack of supply. BPS, however, was confident with the government's ability to increase supplies during the Ramadan season amid the price surges.

The inflation rate in May brought the annual inflation to 4.33% year-on-year. The annual inflation in last month was higher than the corresponding period in 2016 where the inflation rate stood at 3.33%. The rate was however much lower in comparison to the 7.15% in May 2015.

Bank Indonesia's senior deputy governor, Mirza Adityaswara, said the central bank has emphasised the importance of focusing on inflation control to the government, a move made clear following the increase of administered prices in April.

In April, Indonesia's inflation rate was at 4.17% YoY while last year, Indonesia recorded a 3.02% inflation rate.

Mirza was quoted saying that control in volatile food prices was needed. "We have to control volatile food prices inflation fo it is not more than 5% because the administered prices have increased earlier this year," he said.

Food prices were affected as prices deflated by 1.26% in April triggered by a drop in prices of major food commodities like chilis, rice, sugar, beef, chicken, and eggs. Mirza said the central bank will cooperate with the government and local administrators to take heed of the inflation-controlling measures.

"BI discusses inflation because higher prices affect people's purchasing power," he said. He added that excessive inflation would cause a drop in the real interest rate of investments, thus making the country less lucrative for potential investors.