Indonesian central bank forecasts inflation to reach nearly 5.5% in 2012

The Indonesian government's plan to limit consumption of subsidized fuel on April 1 can speed up inflation acceleration to nearly upper limit of the central bank target of 5.5 percent this year, spokesman of the bank Difi A. Djohansyah said here on Tuesday. The central bank governor Darmin Nasution said that the limitation policy can contribute 0.94 percent inflation pressure. The bank initially forecast the inflation in 2012 was going to be at 3.4 percent to 5.5 percent after the consumer prices index accelerated at 3.79 percent in 2011. "The inflation is going to be a little bit below upper target of the central bank of 5.5 percent if the policy to limit subsidized fuel implemented on April 1," Djohansyah said at the press gathering. The central bank had vowed to be intensively intervene the currency market and global bond market to maintain their stability, as the weakening global demand of commodity and concern that foreign investors may pull out funds, could weaken rupiah against the U.S. dollar that would increase import cost and strengthen inflation pressure. The spokesman said that foreign investor had pulled their ownership at the central bank debt paper know as central bank certificate that the total amount of the foreign ownership to 2.6 trillion rupiah (some 285.7 million U.S. dollar) on Jan. 13 from 7.8 trillion rupiah (about 857.1 million U.S. dollar ) at the end of December. The central bank kept its benchmark interest rate on hold at 6 percent on Jan. 12 after weakening of rupiah against the U.S. dollar and the government plan to bank private cars from consuming subsidized fuel on April 1 could speed up inflation. The policy to limit consuming subsidized fuel aims at reducing amounting energy subsidy in the net-oil importer country. Indonesia's rupiah had weakened by more than 6 percent against the U.S. dollar since the central bank cut its basic rate by 25 basis points in October, and 50 basis points in November, to 6.00 percent to spur economic growth amid the weakening global economy. The central bank forecast the economy to expand by 6.5 percent at the fourth quarter that the growth at the entire of last year was predicted to grow at 6.5 percent and 6.3 to 6.7 percents in 2012.