Bank Indonesia Wants Inflation Rate of 3 to 5 Percent
Monday, 08 January, 2007 | 12:40 WIB

TEMPO Interactive, Jakarta: Bank Indonesia (BI) wants the national inflation rate to be between three and five percent, equal to inflation rates in neighboring countries.

According to BI Governor Burhanuddin Abdullah, high inflation rates are caused by people who tend to spend their money fast.

The tendency was influenced by people's expectations regarding the high inflation rate, above 10 percent, that occurred in 2005.

This tendency, said Burhanuddin, must be altered and in the future, people must get used to a low inflation rate.

“To make people get used to something is a long term and structural matter. This is what we call an inflation targeting framework,” he said last week in Jakarta.

Burhanuddin added that consumers' behavior and expectations were the cause of high core inflation.

The core inflation rate in the calendar year of 2006 reached 6.03 percent and this was in fact affected by the Rupiah exchange rate.

However, Burhanuddin said, the resultant core inflation was lower than people's expectations.

AGOENG WIJAYA