Indonesia's says additional inflation from fuel price hike is 3-3.5 percentage pts

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JAKARTA (Oct 17): Indonesia's central bank said the new government's plan to raise fuel prices by nearly 50 percent or 3,000 rupiah per litre will add short-term pressure on inflation, but it will still be managable, said deputy governor.

If the government raises prices in the two weeks after the new president's inauguration on Monday, the additional impact on inflation will be 3 to 3.5 percentage points, deputy governor of Bank Indonesia Perry Warjiyo told reporters.

He expected the additional price pressures to last three months.

Annual inflation in September was 4.5 percent.

Bank Indonesia forecasts inflation to reach 5.3 percent in 2014, without a hike in fuel prices. The central bank's target for inflation is between 3.5 to 5.5 percent.

The fuel price increase will also help rein in the 2015 year's current account deficit, Warjiyo said.

Warjiyo said the deficit could shrink below an earlier estimate of 2.9 percent of gross domestic product if fuel prices were allowed to rise.

In mid-2013, after fuel prices were hiked, inflation spiked to nearly 10 percent but it has been largely contained this year.