Prices are expected to continue increasing. Apart from the inflation in Indonesia as a regular factor, there are three further extra ordinal reasons:
Firstly, there was a demand shock in material whilst the supply remained constant or even decreasing. Secondly, the exchange rate of the rupiah against US dollar and Euro currency has been significantly up-valued, and probably this situation will remain at the same level until end of this year. The reason for this development is the concern of the Indonesian government to maintain the exchange rate on its current level to keep the budget deficit as low as possible. Thirdly, since April 2011 the government has considered to increase the domestic fuel price but until August this plan has not be realised. This increases the risen raw material price again, as the producers have to made price adjustments according to their expectation.
A devaluation of the exchange rate would add new pressure on the governmental fuel subsidies. Even if the oil world price remains stable until end of this year, it is expected that the Indonesian government will increase the domestic oil price by about 20%. This would be a motive for a new price increase.