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Extreme weather may increase food prices in Indonesia next year: central bank

Xinhua, October 11, 2016 Adjust font size:

Earlier rainy season may reduce food production in Indonesia next year, which may raise inflation and hamper implementation of easing monetary policy, a senior official of the central bank said on Tuesday.

"In 2017, inflation is predicted to increase as, so far, rains fall earlier in most of areas in Indonesia. This will contribute to the shrinkage of food output," said Handri Adiwilaga, assistant director at department of economy and monetary of the central bank.

Besides, the hike of electricity tariff for middle-income groups planned next year will also contribute to the acceleration of inflation, Adiwilaga said.

Still, the official did not elaborate further on the precise hike of inflation impacted by the reduction of food production and the planned tariff-hike.

The central bank forecast that inflation will accelerate below 3.5 percent this year and 3 to 4 percent next year.

The lender has vowed to help spur economic expansion, but, if the consumer price index exceed the target, it may hamper the implementation of loosening policy.

The Southeast Asia's largest economy is struggling to stimulate GDP growth amid weakening global economy by the government's policy reforms and tax relaxation program which help lure capital inflows.

The central bank has aggressively cut its basic rate for five times this year to support growth. Last month, the bank reduce its 7 day-reverse-repo rate by 25 basis points to 5.00 percent.

The government expects Indonesia's economy to grow 5.2 this year and 5.1 percent for next year, amid contractions in other nations. Endit