I am still convinced the inflation rate will stand at 7.2 percent..."
Jakarta (ANTARA News) - Finance Minister Chatib Basri said May`s deflation of 0.03 percent suggested that inflationary pressure from an imminent subsidized fuel price hike could be curbed.

"May`s deflation of 0.03 percent brings the inflation rate to 5.64 percent year-on-year. If the fuel price was to be raised the inflation rate might increase 2.4 percent. Given May`s deflation, we are quite optimistic that the inflation rate of 2.4 percent triggered by fuel price hike could be controlled," he said here on Monday.

The Central Statistics Agency (BPS) said earlier in the day the country recorded a deflation of 0.03 percent in May, the first in the same month over the past decade.

May`s deflation brings total inflation this year to 2.3 percent.

Inflation eased to 5.57 percent in April after hitting a 22-month high of 5.9 percent in March as food prices declined.

Bank Indonesia (the central bank/BI) has projected, without taking into account the subsidized fuel price increase, inflation to hover between 3.5 percent and 5.5 percent this year.

The finance minister said the country recorded deflation in May thanks to the effort to curb inflation by ensuring the distribution of foods and basic necessaries.

If similar efforts were to be made to curb the impact of imminent fuel price hike, the inflation rate target of 7.2 percent set in the revised 2013 state budget could be achieved, he said.

"I am still convinced the inflation rate will stand at 7.2 percent and will not be as high as Bank Indonesia`s forecast of 7.76 percent," he said.

Chatib did not specify when exactly the subsidized fuel oil price would be raised. "To be sure, the government will raise the price of fuel oils. As the government has stated earlier the price of subsidized gasoline will be raised by Rp2,000 a liter and diesel oil Rp1,000 a liter," he said.

The government is planning to raise the price of subsidized fuels to secure the 2013 state budget.

(Reporting by Rangga Pandu Asmara Jingga/S012/O001)

Editor: Priyambodo RH
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