The rate of inflation accelerated in December 2010, with consumer prices rising by 7% year on year, representing the fastest pace of growth since April 2009, according to Statistics Indonesia (BPS), the national data provider. On a month-on-month basis, prices rose by 0.9% in December, up from 0.6% in November. Although annual average inflation, at 5.1%, remained within the central bank's target of 4-6%, inflation exceeded the upper end of the target in both November and December. Higher food and transport prices were the main contributors to year-on-year inflation in that month. Food prices rose by 15.6% year on year in December, driven by higher prices for rice, red chillies and red onions as the result of unseasonable weather and supply disruptions. Meanwhile, transport prices were up by 2.7% year on year. Transport prices may rise further in the coming months if the government proceeds with a plan to end sales of subsidised fuel to owners of private cars. Core inflation, which excludes food and fuel prices, remained more or less stable in December, at 4.3% year on year. In 2010 as a whole, core inflation reached 4.1%.

The high price of rice is a particular concern, owing to the dependence of poor households on the staple commodity. Rice purchases are estimated to account for around 70% of poor households' income, and rising prices have the potential to cause widespread hardship and social unrest. To counter rising prices, the State Logistics Agency (Bulog) has secured contracts to import 1.3m tonnes of rice from Thailand and Vietnam. The coming year will be the first since 2008 in which Indonesia will import rice. The government has also temporarily waived import duties on rice, along with duties on wheat, soya beans and livestock feed. Rice prices may begin to fall after the main rice harvest gets under way in March. The Ministry of Agriculture is currently forecasting that production of unhusked rice will rise to 68.8m tonnes in 2011, from 66m tonnes in 2010.