"The core inflation rate (inflation outside consumer price index and government policy) in February was 0.31 percent month-to-month. That is good because before it was always above that," Darsono, chief researcher at BI`s monetary bureau, said here on Tuesday.
He said he believed core inflation in 2010 would continue to drop although the international oil price was rising high, if inflation expectations could be maintained at a low level.
"Hopefully, it will drop to 0.2 percent and I believe it will decline although the rising international oil price could affect several commodities within the core inflation group such as gold," he said.
Darsono said he was also optimistic total long-term inflation could meet the target of three percent or to equal to that of other countries to make the bargaining power of the country`s economy better.
"Inflation must not go far higher than that of other countries. Equalizing the rate to that of other countries is a must," he said.
To meet the long-term inflation target he said three steps need to be taken namely improving the structural policy by improving the supply side to respond demand that could increase economic capacity such as economic climate, infrastructure improvements that could enlarge the economic engine.
The second one is increasing productivity of manpower by improving their skills and competitiveness while the third is increasing efficiency of production cost which must equal that of other countries, he said.
"If the three steps could be realized our economy will not heat up with high inflation if it is spurred to grow up to seven percent because investment as well as production is good," he said.
Darsono said the high rate of inflation in Indonesia occurred due to food price volatility resulting from supply problems and reduction in production. "If the price of foods could be controlled the impact on inflation would also be good," he said.
He said the government has give liberty to National Logistic Agency Bulog to buy as much as possible farmers` rice production during the current harvest season and so it was hoped the price of rice would drop and be not as high as in 2010.(*)
(H-YH/HAJM)
Editor: Ruslan Burhani
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