Indonesia's inflation in April accelerated at a faster pace on annual basis as the government is expected to raise oil prices and remove fuel subsidies, allowing the central bank to keep the interest rate unchanged at its upcoming meeting.
Head of the Statistic Bureau Suryamin told a press conference that inflation reached 4.5 percent in April year on year after growing 3.97 percent in March as the accessories and food prices picked up.
"The highest contribution was accessories prices and food prices," he told a press conference.
Winu Wardana, analyst from CIMB Niaga bank, predicted that the central bank may keep its basic rate at 5.75 percent at its upcoming meeting earlier this month.
"Although the central bank has focused more on containing inflation, it may keep rate unchanged as it has vowed to use out of rate instruments to control prices," he told Xinhua by phone on Tuesday.
The government aims to increase oil prices when the difference of the domestic oil price, assumed at the state budget of 105 U.S. dollar per barrel, with the global oil price equal to or greater than 15 percent. The government also aims to remove subsidized fuel by banning cars owned by middle class and high income groups from consuming the subsidized fuel allocated for lower income people.
"There are some food prices increases for the expectation of the oil price hike plan and removal of the subsidy. And the soaring global gold prices have also affected on the gold prices in the country," said Wardana.
Central bank governor Darmin Nasution said on April 12 should the government raise oil prices, the inflation may accelerate to 6. 6 percent this year.
The central bank has extended pause of cutting its basic rate at its April 12 meeting for two straight months after cutting 75 basis points at the end of last year and 25 basis points at the beginning of this year.
The central bank governor has said that the bank would prefer to use its out of interest rate instrument to absorb excess liquidity, including raising banks' reserve and boosting market operation.
On monthly basis, the consumer price index rose by 0.21 percent in April, higher than that of 0.07 percent in the previous month, said Suryamin.
Annual core inflation that excludes volatile food and energy prices reached 4.24 percent in April, lower than 4.25 percent in March, he said.
Tens of thousands of workers take to the street in the capital of Jakarta and other big cities nationwide demanding a pay hike.
Indonesian President Susilo Bambang Yudhoyono has said that the government would try to boost revenue from taxes and other sectors to deal with a widening budget deficit, and to keep the deficit at less than 3 percent, and that he was optimistic that the country's economy would grow by 6.5 percent this year.
The central bank forecast the economy to expand by 6.4 to 6.8 percent next year and it may grow at the top level of the range at about 7 percent.
Indonesia's exports rose by 6.93 percent to 7.27 billion U.S. dollars in March year on year, said Suryamin.
Indonesia's foreign direct investment rose by 30.3 percent to 51.5 trillion rupiah (some 5.6 billion U.S. dollars) in the first quarter year on year following the second credit rating upgrade to the investment grade by Moody's, Chairman of Coordinating Investment Board Gita Wirjawan said on April 23.
The government is targeting 206.8 trillion rupiah (22.495 billion U.S. dollars) in foreign direct investment this year, which would be an 18 percent increase on last year's record of 175. 3 trillion rupiah (19.079 billion U.S. dollars)./.