The Central Bureau of Statistics will release the January CPI data next Friday.
Seven economists expect the CPI to have risen by 6.5-6.8 percent from a year earlier. Against the previous month, the January CPI should have ticked up by 0.9-1.24 percent, they said.
In December, CPI rose 6.6 percent year-on-year and 1.1 percent month-on-month, driven by higher demand and increased food prices during the Christmas and year-end festivities.
Economists attributed the hike in in fresh food and food products partly to an overall increase in world food commodity prices, particularly for soybean and flour.
A weaker rupiah during the month is also partly to blame, they said.
'We expect to see a relatively high inflation rate in January 2008 as the prices of most basic consumer goods, especially food, rose rather significantly,' Citigroup (nyse: C - news - people ) economist Anton Gunawan said.
Gunawan said the price of rice climbed by around 15 percent, that of cooking oil by around 20 percent, imported soybean also by 17 percent, and wheat flour by around 6 percent.
But during the first three weeks of this month, prices of spices and local white sugar fell 8.6 percent and 4.9 percent respectively, Gunawan said.
He said a weaker rupiah since the end of last year was probably the main trigger for the massive increases in food prices, as food became more expensive in the local currency amid continuing price rises on the global commodity market.
'But in the case of rice, (the price rise) is basically seasonal in nature,' said Gunawan, explaining that rice normally becomes more expensive prior to the big harvest period at the end of February and March.
Standard Chartered (other-otc: SCBEF.PK - news - people ) junior economist Eric Alexander Sugandi said the rise of food prices in January was also partly caused by supply shortage and distribution problems following heavy rains early in the month.
'On the domestic side, we had supply shortages and distribution problems of some food commodities, as in the case of soybean, cooking oil and wheat flour,' Sugandi said.
'Almost all foodstuff prices went up in January. So I would expect the CPI in January to be even higher than the previous month, ' Bank Internasional Indonesia (BII) economist Juniman said.
Juniman said apart from higher food prices, there was also a significant hike in the prices of building materials such as cement and steel products.
Sugandi of Standard Chartered said heavy rains during the first week of January may have damaged rice farms in certain rice-producing centers on the main island of Java, which may impact rice production in the first quarter this year.
'Therefore, we hope the government will act fast in managing inflation by securing food stocks and expediting their distribution to the markets,' Sugandi said.
Juniman said he expects inflation to stay high in the first quarter of this year and only to begin to ease in the second quarter. Therefore, he expects the central bank to keep the benchmark BI rate at 8.0 percent when it holds its rate-setting meeting on February 6.
'Although the US Federal Reserve cut its fed funds rate by 75 basis points recently, I expect Bank Indonesia to keep its benchmark BI rate unchanged in February as inflation stays high,' Juniman said.
Below is a summary of economist forecasts for the January CPI:
ING (nyse: IND - news - people ): up 6.5 percent yr-on-yr; up 0.9 percent month-on-month
BNI: n/a; up 1.0 percent month-on-month
Standard Chartered: up 6.5 percent yr-on-yr; up 1.0 percent month-on-month
Mega Capital: up 6.58 percent yr-on-yr; up 1.04 percent month-on-month
Erdikha Elit: n/a; up 1.15 percent month-on-month
Citigroup: up 6.75 percent yr-on-yr; up 1.2 percent month-on-month
BII: up 6.8 percent yr-on-yr; up 1.24 percent month-on-month
(1 US dollar = 9,365 rupiah)
roffie.kurniawan@thomson.com
