JAKARTA: Bank Indonesia (BI) estimates average global crude oil prices to rise to $47 per barrel this year. There are concerns that the price increase may trigger fuel oil prices adjustments in Indonesia, and affect inflation rate.
“The rise of global oil prices will affect commodities directly, and prices in general,” said Agus Martowardojo, Governor of Bank Indonesia on Wednesday.
The assumption hike is not yet significant, considering that BI studies at the end of December, 2016, stated that global crude oil prices would reach $45 per barrel. Agus said the crude price has become one of BI’s main attentions, as crude price is a component that can increase the inflation of administered prices.
Inflation from administered prices had already increased during January 2017, as quoted by Antara, due to the increase in administration tariffs on vehicle registration certificates and price adjustment for electricity subscription of 900 VA. The rise of global crude prices will certainly cause fuel oil price adjustments to meet the economic price. In addition, BI also observes the impact from the implementation of one-priced fuel oil price.
The central bank is concerned that fuel oil prices adjustments will affect inflation from volatile foods prices. BI wants to maintain volatile foods inflation at 4-5% from 5.9% in 2016. “Fuel oil price adjustments will put pressure on volatile foods,” Martowardojo said.
National inflation rate is expected to remain in the range of 4-5% plus minus 1% in accordance with BI’s target in the effort to maintain volatile food inflation and compensate for potential increase in administered price inflation.
Indonesian crude price (ICP) assumption is set at $45 per barrel in the revised state budget.
