REPUBLIKA.CO.ID, JAKARTA -- The price of non-subsidized liquefied petroleum gas (LPG) in 12-kg cylinders which increases by Rp1,000 a kg will contribute 0.1 percent to the nation's inflation rate this year, Bank Indonesia Deputy Governor Perry Warjiyo said.

"According to our calculation, the 17 percent (Rp1,000 a kg) rise in LPG price in January may increase the inflation rate by 0.1 percent," he told a press conference here on Thursday.

Earlier, state oil and gas company Pertamina raised the price of LPG in 12-kg cylinders across the country by an average of Rp3,959 a kg effective January 1, 2014. The increase was designed to curb the company's losses from the sale of LPG in 12-kg cylinders which averaged Rp6 trillion per year.

However, the company later revised the price of LPG in 12-kg cylinders following a consultation meeting between the government and the State Audit Board (BPK).

At the meeting, a decision was taken to raise the price of LPG in 12-kg cylinders by Rp1,000 per kg which came into effect from midnight on January 7, spokesperson of Pertamina's marketing operation region I, Fitri Erika, said on Monday.

Perry said the central bank had also predicted the LPG price hike would raise the inflation rate by 0.13 percent.

Indonesia's inflation rate in 2013 touched 8.38 percent, well above the inflation rate target of 3.5-5.5 percent. Meanwhile, the inflation rate stood at 4.3 percent in 2012.

The rising inflation rate was chiefly driven by volatile domestic food prices as a result of subsidized fuel price hike in late June 2013. The rising fuel price brought second round effect.

Yet, the inflationary pressure could be gradually controlled to a level which was far below the inflation caused by fuel price hikes in the previous years.

The close coordination between the government and the central bank to address the second round effect eased the inflationary pressure and the inflation rate returned to the normal level in September 2013.

"Looking ahead, Bank Indonesia is convinced that the inflation rate could be kept in check at a range target of 3.5-5.5 percent in 2014 and 3-4 percent in 2015. To that end, Bank Indonesia will continue to step up its coordination with the central government, and regional governments through the inflation controlling team (TPI)," he said.

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