Indonesia to Keep Inflation Rate at 5.3 Percent

JAKARTA, KOMPAS.com – The government will strive to keep the inflation rate at 5.3 percent as assumed in the 2011 State Budget , Finance Minister Agus Martowardojo said.

“We are targeting 5.3 percent and we will coordinate with Bank Indonesia which is responsible for monetary control,” he said after a meeting here on Wednesday.

He said the government would pay attention to inflation as investors’ worries over inflation in 2010 had once weakened the Indonesian Stock Exchange’s composite price index to 3,400 points.

“Yesterday the market reacted due to inflation worries. That is normal. In our term the market is just adjusting its composition. They think there will be high inflation because the oil price is up and they then make profit taking moves,” he said.

He said the government right now was focusing on carrying out its working plans and the budget that has been set by continuing monitoring the economic situation and conditions in Europe.

“Worries abroad are conditions in Europe, that Portugal and Ireland seem to need a bailout but we heard that European countries also also Japan were all committed to help. So it is the dynamics that we must be alert on,” he said.

Right now, he said, the government would not as yet wish to change the macro-economic assumptions and indicators in the 2011 budget including the assumption on inflation.

“We are now concentrating on executions. We have not conducted re-forecasting but we will be alert,” he said.

The government has kept the assumed rate of inflation for the 2011 at 5.3 percent although the annual rate of inflation in 2010 reached 6.96 percent.