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ndonesia'€™s consumer price index (CPI) rose to 4.53 percent in September year-on-year (y-o-y) as compared to 3.9 percent in the previous month, partly due to an increase in prices for foods, tobacco and electricity, the Central Statistics Agency (BPS) reported Wednesday.

However, despite the increase, inflation was below the market consensus of 4.57 percent, analysts said.

The BPS report showed that monthly inflation grew by 0.27 percent, lower than the 0.35 percent recorded in the same month last year. With the monthly increase, the combined inflation rate rose to 3.7 percent for the Jan.-Sept. period, slightly below Bank Indonesia'€™s (BI) inflation target of 4.5 percent this year.

The BPS attributed the satisfactory inflation levels to lower costs for processed food, non-alcoholic beverages, tobacco, rent and wages. '€œA number of big commodities showed high production levels and supply, such as red onions and fish,'€ BPS chairman Suryamin said during the media briefing on Wednesday.

Apart from good weather being a factor in the high supply of fish and horticultural produce, Suryamin said that low airfares and declining demand for travel following the Idul Fitri holidays had contributed to low inflation, accounting for only 0.24 percent of the headline inflation rate. He also said that the falling price of gold jewelry had contributed to the low increase in inflation.

Inflation in September was partly driven by state-owned Pertamina'€™s recent decision to increase the price of 12-kilogram LPG canisters by Rp3,500, as well as the passing of an Energy and Mineral Resources Ministry regulation to raise electricity prices. Both decisions had a major impact on the cost of processed food, resulting in 0.51 percent inflation.

Additionally, Suryamin said that high inflation was caused by rising education costs in the new school year, bringing inflation in the education, recreation and sports sector up to 0.68 percent.

Core inflation '€” price levels that exclude prices for volatile and government-controlled commodities '€” stood at 4.04 percent in September, falling from 4.47 percent a month earlier. The dip in core inflation stemmed from the LPG and electricity price hike, according to the BPS.

Barclays Bank analysts Wai Ho Leong and Bill Diviney said in their reports that the benign inflation provided a more conducive environment for the upcoming government to raise the price of subsidized fuel.

'€œWith inflationary pressure remaining benign and few signs of upward pressure in the near term given the decline in global prices, we think the timing has become ripe for fuel price adjustments,'€ they said. '€œOur base case remains for an initial hike of Rp 1,500 [23 percent] this November.'€

BI governor Agus Martowardojo said that a fuel price adjustment would inevitably increase inflationary pressure. '€œThe current inflation rate is well within the 4.5 percent range. If fuel prices are increased by Rp 3,000 [per liter], November'€™s rates might balloon to 8.5 or 9 percent,'€ Agus told reporters at a separate event in Jakarta on Wednesday.

Dian Ayu Yustina, an economist from PT Bank Danamon Indonesia, Tbk., said that the BPS data was still in line with her forecast of mild inflation levels.

'€œAs expected, inflation remained mild in September and even came out lower than the consensus forecast at 0.27 percent month-on-month (m-o-m) and 4.53 percent y-o-y,'€ Dian said in a report the Post obtained Wednesday. (gda)