Indonesia's inflation rate surges to nearly 18 percent

Indonesia's inflation rate surged to nearly 18 percent in October, the highest rate in four years, largely reflecting the government's move to hike domestic fuel prices, which in turn raised the cost of many goods and services, the Central Statistics Agency said Tuesday. The Cabinet, reacting to soaring global oil prices, reduced fuel subsidies on Oct. 1, which more than doubled fuel prices. The move could help the government, which spent US$7.4 billion last year on fuel subsidies, to cut its ballooning budget deficit.

Fuel price increases are a politically sensitive issue in Indonesia, where a big increase in 1998 triggered rioting that helped topple former dictator Suharto.

President Susilo Bambang Yudhoyono "is very concerned (with the situation) and had ordered the (economics ministers) y to ... take necessary steps to ease the inflation," spokesman Andi Mallarangeng said after the inflation figure was released.

But Economy Minister Aburizal Bakrie played down concerns over inflation, describing the surge in October as a "temporary phenomenon."

He predicted inflation would fall drastically in November and December, and said the government was sticking to its official inflation projection of 7-8 percent in 2006, reports the AP. I.L.