Indonesia moves to contain risk of inflation after fuel price rise

 The Indonesian government took measures to control the hikes of goods' prices across the country following the raise of subsidized-fuel prices by nearly 31 percent last week.
Indonesian President Joko Widodo on Monday told governors from all 34 provinces in a meeting at the Botanical garden Palace here to check the stockpiles and distribution of goods in their provinces as the president expected the price hikes contributed by the fuel price increase to be no more than 2 percent this year.
"On inflation, I told (the governors) to monitor the stockpiles of goods and their distribution," Jokowi, as Widodo is known, said after the meeting with the governor at the palace.
"The additional inflation that we target is no more than 2 percent. It must not be over that," he stressed.
That was not in line with the central bank calculation which has said that the additional inflation from the fuel price hike may reach 3 percent.
Jokowi disclosed that he considered the current goods' price hikes remained in control.
"We don't need to worry about the information," he said.
The country's central bank, Bank Indonesia, has forecast inflation at 3.5 to 5.5 percent at the end of year, but the fuel price rise may push up the inflation.
The Indonesian government rose the fuel prices last Monday by nearly 31 percent to bolster government finances and help with the nation's trade imbalance.
The new policy gives certainty to investors that the Indonesian government plans to build massive infrastructures in the country, as President Jokowi aims to pursue over 7 percent GDP within 2 years, compared with this year's 5.2 to 5.3 percent GDP expectation.
Besides, it may slash the country's import of fuel that has widened trade balance gap and made rupiah fallen against the U.S. dollar.
The Indonesian central bank has hiked its benchmark interest rate by 25 basis points to 7.75 percent to cope with the rising inflation.
Indonesia is a net oil importer country and had provided a huge oil subsidy which is the main reason behind its the budget deficit and the nation's trade imbalance.