"No need for too much concern . It would have a short term effect. In two or three months the condition would be normal again," Governor of the central bank Agus Martowardojo said.Jakarta (ANTARA News) - Bank Indonesia said it is not worried by inflation triggered by plan to raise the prices of subsidized oil fuel (BBM) before the end of this year.
"No need for too much concern . It would have a short term effect. In two or three months the condition would be normal again," Governor of the central bank Agus Martowardojo said here on Monday.
Agus said the government needs to raise the prices of BBM to keep a healthy fiscal.
"Price adjustment is needed considering the fiscal condition," he added.
Bank Indonesia hopes that the prices of subsidized BBM would be raised before the US central bank, the Fed, begins to raise its interest rate, he said.
The Fed Fund rate is expected to be raised in mid 2015, he said.
Deputy Governor of Bank Indonesia Mirza Adityaswara said the sooner the BBM prices are raised the better.
"Raising the subsidized prices of BBM shows strong will of the government for structural reform earlier," Mirza said.
He added. raising the BBM prices is the right option to cope with budget and current account deficits.
If the BBM price hike is delayed , the inflationary effect also will be delayed that Bank Indonesia will have to continue tight monetary policy, he said.
He said a high price rise at once would be better than raising the price gradually .
He estimated a price rise of Rp3,000 per liter would result in an increase in inflation by 2.5-3 percentage points.(*)
Editor: Heru Purwanto
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