Indonesia Could Face Inflation Spike Due to Oil Subsidy

A government move to reduce crucial fuel price subsidies could hit Southeast Asia’s largest economy hard, analysts warn.

Indonesia, which enjoys some of the world’s lowest petrol prices thanks to $20 billion in annual fuel subsidies, could see prices rise between 13 U.S. cents and 25 cents —an increase of up to 46 percent—in November, according to analyst estimates.

As a result, annual inflation is expected to spike high above the central bank’s range of 3.5 to 5.5 percent.

United Overseas Banking (UOB) is predicting fuel prices to increase 46 percent by November, which will bring the average inflation rate to 6.5 percent this year. Meanwhile, Barclays is expecting a 23 percent rise in November, followed by another increase in 2015, resulting in a 6.2 percent inflation rate for 2014.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza