On an annual average basis, consumer price inflation accelerated to 5.1% in 2010, from 4.8% in 2009. Although the central bank has embarked on a process of normalising interest rates, inflationary pressures will build again this year as economic activity accelerates. A sharp increase in the international price of oil and non-oil commodities, notably grains, will also exert upward pressure on domestic prices. However, the rupiah's continued appreciation against the US dollar and the government's decision in January to suspend import duties on a range of goods (notably foodstuffs) will limit inflation. After accelerating in January to 7% year on year, the fastest pace for 21 months, inflation slowed in February and again in March, to 6.7%. We expect inflation to average 6.2% this year, slightly above BI's 4-6% target range. Inflation will slow to 5.9% in 2012, before accelerating to 6.3% on average in 2013-15. The primary risk to our forecast comes from the possibility that high global oil prices could force officials to raise domestic fuel prices to keep the budget deficit under control, especially given that their assumption that oil prices will average US$80/barrel this year looks unrealistically low. But there is little sign that the government is contemplating raising prices. In fact, it has repeatedly postponed plans to end the sale of subsidised fuel products to owners of private cars on Java.