As fuel subsidies fall in Indonesia, inflation running at 7-year high

Robert Besser
06 Oct 2022, 13:19 GMT+10

Due to rising transportation costs after a fuel price hike, Indonesia's inflation rate in September surged to its highest level since October 2015
In September, the annual inflation rate rose to 5.95 percent, up from 4.69 percent in August
The annual core inflation rate, which excludes government-controlled prices and volatile food prices, accelerated in September to 3.21 percent, compared with 3.04 percent in August

JAKARTA, Indonesia: Due to rising transportation costs after a fuel price hike, Indonesia's inflation rate in September surged to its highest level since October 2015, Statistics Indonesia data reported this week.

In September, the annual inflation rate rose to 5.95 percent, up from 4.69 percent in August.

The annual core inflation rate, which excludes government-controlled prices and volatile food prices, accelerated in September to 3.21 percent, compared with 3.04 percent in August and analysts' forecasts of 3.60 percent.

"September's inflation was mostly affected by the rise in fuel prices and inflation in the transportation sector," said Margo Yuwono, head of Statistics Indonesia.

As several regions have yet to increase their transportation fares, inflation could increase further in October.

As part of the government's efforts to reduce spending on subsidies, Indonesia raised subsidized fuel prices by some 30 percent in early September.

Also, in its September meeting, Bank Indonesia (BI) increased policy interest rates by 50 basis points to control inflation, which is expected to peak at just over 6 percent, compared to its target range of 2 to 4 percent.

Bank Danamon has revised up its inflation outlook for the end of 2022 to 6.5 percent from 4.5 percent, said Irman Faiz, an economist at the bank.

"On the policy front, we expect BI still has 100 bps of space to hike the policy rate from the current level this year, as monetary policymakers have vowed to tame inflation down to their target range by 2023," he added, as quoted by Reuters.

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