Indonesia inflation hits 11.68%

JAKARTA - INDONESIA'S consumer price index (CPI) in November rose 11.68 per cent from a year earlier, the Statistics Bureau said on Monday, above expectations, and analysts expect the central bank to hold rates unchanged this week.

Analysts polled by Reuters had forecast annual inflation of 11.60 per cent in November, following October's inflation rate of 11.77 per cent.

Month-on-month inflation was 0.12 percent in November against a market forecast of 0.14 per cent and compared to 0.45 per cent in the previous month. The monthly figure is not seasonally adjusted.

The majority of analysts polled before the data was released had predicted that the central bank would keep its benchmark rate unchanged at its next policy meeting, due on Thursday.

Indonesia inflation 11.68 pct in November: statistics agency

Jakarta (ANTARA News) - Indonesia's annual inflation dropped to 11.68 percent in November from 11.77 percent in October due to lower energy and commodity prices, according to official figures Monday.

The November consumer price index (CPI) fell to 0.12 percent month on month compared to 0.45 percent the month before, the statistics agency was quoted by AFP as saying.

The latest figures fell below the median forecast of 11 economists polled by Dow Jones Newswires, who predicted an average CPI rise of 0.17 percent month
on month and 11.71 percent year on year.

Despite the easing inflation, analysts predicted the nation's central bank, Bank Indonesia, will not cut its policy rate from 9.50 percent when it meets Thursday.

Fears over a vulnerable rupiah, which has fallen by 24 percent against the dollar this year, will likely stay the central bank's hand, analysts said. (*)

11.77 % October 2008

Indonesia - 11.77 percent for October following the previous month’s CPI of 12.14%, which was a 2-year high, due to higher food prices ahead of the Eid al-Fitr Muslim celebrations

September 2008 Inflation Rate

Inflation Report (Consumer Price Index)
Based on Year on Year Measurement

Month / Year ----- Inflation
September 2008 ----- 12.14 %
August 2008 ----- 11.85 %
July 2008 ----- 11.90 %
June 2008 ----- 11.03 %
May 2008 ----- 10.38 %
April 2008 ----- 8.96 %
March 2008 ----- 8.17 %
February 2008 ----- 7.40 %
January 2008 ----- 7.36 %
December 2007 ----- 6.59 %
November 2007 ----- 6.71 %
October 2007 ----- 6.88 %

Source: www.bi.go.id

Indonesia raises key interest rate as inflation gains

Indonesia's central bank raised its policy rate to slow inflation and boost the rupiah after the nation's stock index plunged 10 percent yesterday amid a global credit crisis.

Bank Indonesia Governor Boediono and his seven colleagues raised the BI Rate to 9.5 percent today, from 9.25 percent. Fourteen of 19 economists surveyed by Bloomberg News forecast today's move, with five expecting no change.

Indonesia refrained from joining Australia, which cut rates today by the most since a recession in 1992, China and Taiwan in reducing borrowing costs after inflation accelerated last month to a two-year high. Still, today's increase may be the last this year as the central bank shifts its focus to supporting growth, said Helmi Arman at PT Bank Danamon Indonesia.

``They must be careful not to overdo'' rate increases because it could affect growth, said Arman, based in Jakarta. ``At 9.5 percent there will already be a quite thick spread over inflation expectations.''

A benchmark rate of 9.5 percent would be ``adequate'' to keep price gains between 6.5 percent and 7.5 percent next year, Deputy Governor Hartadi Sarwono said in an interview on Aug. 8. Today's decision marked the sixth straight increase in the policy rate by Bank Indonesia.

``The move to increase the rate is consistent with our monetary-policy strategy,'' Boediono said at a briefing in Jakarta. ``The policy to stabilize the rupiah is directed toward avoiding excessive fluctuation.''

Rupiah Declines

The rupiah fell 0.2 percent to 9,595 against the dollar at 12:01 p.m. in Jakarta, extending yesterday's 1.5 percent decline. The currency has dropped 2.3 percent in the past month, increasing the cost of importing fuel, soybean and wheat.

``The need to support the rupiah should help Bank Indonesia justify its decision to raise the rate,'' said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta.

Consumer prices rose 12.1 percent from a year earlier last month, after gaining 11.85 percent in August.

``We expect inflation to remain above 11 percent through January, and for that reason,'' the central bank was expected to raise the rate, Michael Spencer, chief Asia economist at Deutsche Bank AG, said in a note to investors. ``Slowing growth and, eventually, falling inflation should see the central bank cutting rates in the second half of 2009.''

Accelerating inflation and a rout in commodity stocks led to the biggest decline in the benchmark stock index yesterday since the 2002 Bali bombings.

Indonesia's President Susilo Bambang Yudhoyono yesterday said his government seeks to keep economic growth at 6 percent and will remain alert amid the credit-crisis ``tsunami,'' which started in the U.S.


Source: bloomberg.com

Publication date: 10/8/2008

BI raises rate to 9.50% on inflation concerns

Bank Indonesia (BI) has raised its benchmark rate for the sixth time this year, from to 9.25 to 9.5 percent, amid inflationary pressures and global economy concerns. The central bank governor Boediono told reporters Tuesday that the key rate was increased to suit high inflation and to anticipate the global financial crisis.

The country's annual price inflation spiked to its highest level in September, rising by 12.14 percent compared to a year earlier.

The Central Statistics Agency reported on Monday that monthly inflation reached 0.97 percent in September, up significantly from 0.51 percent in August. (dre)
Source : The Jakarta Post, Oktober 7 2008

Ramadan propels September inflation

Inflation in September reached higher-than-forecast 0.97 percent, with consumer prices pushed up by high demand during the fasting month and ahead of the Idul Fitri holiday, the Central Statistics Agency (BPS) reported Monday.

The 0.97 percent monthly inflation was above the government's expectation of 0.8 percent.

"(The inflation rate in) September was the highest of the past three Ramadan festivals, as the fasting month fell throughout September," said BPS deputy chairman for distribution statistics Ali Rosidi.

Last year, the fasting month started mid-September and ended mid-October. In 2006, it began late September and ended late October.

On a yearly basis, inflation in September rose to 12.14 percent from a year earlier, up from 11.85 percent in August, BPS reported.

Between January and September, inflation reached 10.47 percent.

The government projects inflation will reach 11.4 percent by the end of 2008, while the central bank estimates between 11.5 percent and 12.5 percent.

All 66 cities surveyed by BPS experienced inflation in September, based on the BPS data. Tarakan in East Kalimantan had the highest rate at 2.8 percent while Manado in North Sulawesi had the lowest at 0.03 percent.

Inflation nationwide was mostly contributed by the rising prices of staple foods, housing, water, electricity, gas and fuels. The prices of staple foods rose 1.9 percent, while the prices of housing, water, electricity, gas and fuels rose 1.22 percent.

Ali said inflation would likely decrease in October and November, but probably increase in December as consumer spending rose again for Christmas and the New Year celebrations.

Last year, inflation reached 0.8 percent in September, 0.79 percent in October, 0.18 percent in November and 1.1 percent in December, according to BPS.

Standard Chartered Bank senior economist Fauzi Ichsan said inflation would reach about 12 percent by the end of 2008.

With the high September inflation and the weakening rate of the rupiah against the dollar, Fauzi predicted the central bank would raise "its interest rate by 25 basis points" on Tuesday, bringing the rate to 9.5 percent.

He said a rise in the Bank Indonesia (BI) rate would bring the rupiah closer to Rp 9,500 to the US dollar, which would reduce imported inflation.

"If the rupiah exceeds the level of 9,500 (per dollar), it may quickly snowball to reach 10,000 (per dollar)."

On Monday, the rupiah slipped 1.5 percent to 9,575 per dollar, Bloomberg reported.

BI deputy governor Hartadi A. Sarwono said market players should not panic seeing the decline in the rupiah. "BI will always be in the market."

Aditya Suharmoko, The Jakarta Post, Jakarta

Indonesia's inflation accelerates to two-year high

Indonesia's inflation accelerated to the fastest pace in two years in September, sustaining pressure on the central bank to increase borrowing costs. The rupiah and the benchmark stock index fell. Consumer prices rose 12.14 percent from a year earlier last month, after gaining 11.85 percent in August, the Central Statistics Bureau said in Jakarta today. That compares with the 11.96 percent median forecast of 18 economists surveyed by Bloomberg News.

Prices rose in September as the nation with the world's largest Muslim population prepared to celebrate the end of the fasting month of Ramadan. That may prevent Bank Indonesia from joining other Asian central banks in reversing interest-rate increases even after the government said yesterday the global credit crisis may slow exports and affect growth.

"They are not in a position to cut interest rates but I think they will change their stance toward the end of the year,'' said Tomo Kinoshita, chief economist for Asia outside Japan at Nomura Holdings Inc. "Domestic demand has really been robust in Indonesia, which has not been seen in other parts of Asia.'' Indonesia's central bank may raise its policy rate tomorrow to 9.5 percent, the highest in 1 1/2 years, according to 14 of 19 economists surveyed by Bloomberg News.

The rupiah's decline may also prompt the central bank to increase its policy rate, said Sim Moh Siong, a strategist with Citigroup Inc. in Singapore. The currency slipped 1.5 percent to 9,575 against the dollar at 3:57 p.m. in Jakarta.

Stocks Fall

The benchmark stock index extended its loss after the inflation data was released. The measure plunged 10 percent in Jakarta today.

``Further gradual rate hikes for the rest of the year remain highly possible to keep inflation in check and to stabilize the rupiah,'' Sim said.

Still, Bank Indonesia and the government are ``increasing cooperation'' to limit the impact of the global liquidity squeeze on Southeast Asia's biggest economy, Governor Boediono said yesterday in Jakarta. The credit shortage may last as long as a year, he said.

Consumer prices rose 0.97 percent in September from a month earlier, the statistics agency said. Prices increase during Ramadan as Indonesian Muslims travel more to visit relatives and spend more money to prepare feasts for Id-ul-Fitr, which marks the end of the fasting month.

Fuel Prices

Two price increases in liquefied petroleum gas also led to an acceleration of inflation. PT Pertamina, the state oil company, raised the price of LPG sold in 12-kilogram (26-pound) canisters used by non-low-income households by 24 percent in July and 9.5 percent in August.

Gains in processed food-prices accelerated to 11.2 percent last month, while housing costs climbed 11 percent.

Indonesia's exports rose 30.3 percent to $12.5 billion in August, the statistics bureau said today. Imports from outside trade zones increased 45.4 percent to $10.1 billion, leaving a trade surplus of $2.45 billion.


Source: bloomberg.com

Publication date: 10/6/2008

Indonesian inflation increases in September

Jakarta (ANTARA News) - Indonesia's inflation rate rose a faster-than-expected 12.14 percent in September against a year ago, the Central Statistics Agency was quoted by AFP as saying Monday.

Analysts had forecast an annual rate of 11.99 percent, but said prices were driven higher by the cost of food and housing in the Ramadan festive season.

The central bank is expected to hike its benchmark interest rate by another 25 basis points on Tuesday to 9.50 percent in a bid to quell inflation, analysts said. (*)

RI'S 2008 Inflation to Reach 12.2 Percent

Jakarta - Indonesia's full-year inflation rate in 2008 is expected to reach 12.2 percent as the on-month inflation rate in August stood at 0.51 percent, an economist said.

"The governmment will find it very hard to achieve its inflation rate target of 11.4 percent set for this year. I predict the inflation rate would reach 12.2 percent in view of the current favorable economic developments," Ichsanuddin Noorsy of the Indonesia Awakening Team said here on Monday.

The Central Bureau of Statistics (BPS) said earlier in the day Indonesia's monthly inflation rate in August 2008 reached 0.51 percent, bringing the calendar inflation rate to 9.4 percent and the on-year inflation rate to 11.85 percent.

The August 2008 inflation was mainly the result of a 0.94 percent rise in the prices of foodstuffs and a 1.36 percent increase in the prices of services in the education, recreation and sports sectors, BPS Chief Rusman Heriawan said.

"The BPS did not record any increase in transport fares in August," he said.

The agency noted a rise in the prices of a number of commodities including fresh fish, chicken meat, eggs, and liquefied petroleum gas (LPG) as well as an increase in senior high school tuition fees contributed a lot to the August 2008 inflation.

"Although the rise in the prices of LPG was postponed it had contributed to the August 2008 inflation rate. The rise in senior high school tuition fees followed an increase in elementary and junior high school tuition fees a month earlier," he said.

The BPS chief said the prices of a number of commodities including gold, onion, chili, Pertamax gasoline and cooking oil fell in August.

Ichsanuddin said the inflation remained a "disease" because of uncertainty in the global economy.

"The uncertainty is expected to continue until the first semester of 2009 and the prices of commodities will remain volatile," he said.

The other indication was the persistent steep rise in the prices of materials for infrastructure projects at home, he said.

"Meanwhile at the same time the prices of food commodities have shown no sign of stability," he added.

The newly-announced rise in the prices of liquefied petroleum gas would drive up the prices of other goods, putting a further strain on the inflation rate, he said. "The multiplier effect of the rise in the prices of LPG will continue," he said.

Indonesian bank governor vows to reduce inflation

By Gde Anugrah Arka and Adriana Nina Kusuma

The governor of the Indonesian central bank said he would "do whatever it takes" to bring annual inflation below 10 percent in 2009, from 11.9 percent in July, as elections next year are expected to ensure strong economic growth.

Indonesia, the biggest Southeast Asian economy, which expanded 6.3 percent in 2007, the fastest pace in 11 years, will be sustained by strong domestic demand thanks to parliamentary and presidential elections next year, the bank governor, Boediono, who goes by one name, said.

"During election years, demand will always be strong. So there is no problem. There is no need to urge us, the monetary authorities, to offer additional stimulus" to improve the economy, said Boediono, speaking at his home near Yogyakarta, central Java.

"My focus therefore is to stabilize prices so that we can bring down inflation from 11.9 percent to a single-digit number."

Indonesia holds parliamentary elections in April, and presidential elections a few months later.

Typically, political parties spend money on gifts such as T-shirts and food to woo voters in a country of 226 million people, delivering a significant push to the economy.

"If we remember the 2004" elections, "demand was very strong then, spending was very significant. Money in circulation rose sharply in 2004," Boediono said. "If there is an impediment to growth, it is on the supply side, whether electricity, traffic jams," he said.

The Indonesian statistics bureau is due to release August inflation data later Monday.

Analysts polled by Reuters expect annual inflation of 11.9 percent, and predict Bank Indonesia will raise its key interest rate again, by 25 basis points, at its monetary policy meeting later this week, which would be the fifth hike this year.

Bank Indonesia has raised interest rates by a total of 1 percentage point to 9 percent to contain inflation.

Boediono declined to comment on the outlook for interest rates, but said the central bank would use all monetary tools available to curb inflationary pressures, which mainly stem from higher fuel and food prices.

While the United States and Europe face the prospect of slowing economic growth or even recession, and a crisis in the financial system, Indonesia can afford to tackle inflation using monetary tightening without having to worry about the effect on economic growth or weakness in the domestic financial system, Boediono said.

"We are fortunate as our financial system is okay so that it is easier to make decisions compared to other countries," he said.

"In my view, we only have to face one problem. The issue here is really about inflation."

Even though real interest rates, the difference between inflation and nominal interest rates, are negative, Boediono said that was not a problem for Indonesia and was common in other countries in the region.

He also said the central bank does not target a specific level for the rupiah, even though market players say they believe Bank Indonesia has intervened in the market to keep the currency at around 9,100 per dollar in order to curb imported inflation.

On Aug. 5, the central bank forecast annual consumer inflation at between 11.5 percent and 12.5 percent at the end of 2008, easing to between 6.5 percent and 7.5 percent next year. Annual inflation spiked after the government hiked subsidized fuel prices by an average of nearly 30 percent in May.

Indonesia has been largely isolated from the effect of the financial market turmoil in the United States, as its commercial banks have relatively small exposure to the U.S. debt market.

Many of the local banks are relatively well-capitalized following a costly bailout in the wake of the 1997-98 Asian financial crisis.

Indonesia Central Bank Chief Tackles Inflation

Indonesia's central bank governor said he would "do whatever it takes" to bring annual inflation below 10 percent in 2009, from 11.9 percent in July, as elections next year will ensure strong
economic growth.

Southeast Asia's biggest economy -- which expanded 6.3 percent in 2007, the fastest pace in 11 years -- will be sustained by strong domestic demand thanks to parliamentary and presidential elections next year, Governor Boediono told Reuters in an interview at the weekend.

"During election years, demand will always be strong. So there is no problem. There is no need to urge us, the monetary authorities, to offer additional stimulus" to boost growth, said Boediono, speaking at his home near Yogyakarta, central Java.

"My focus therefore is to stabilise prices so that we can bring down inflation from 11.9 percent to a single-digit number."

Indonesia holds parliamentary elections in April 2009, and presidential elections a few months later.

Typically, political parties in Indonesia spend money on gifts such as tee-shirts and food to woo voters in a country of 226 million people, delivering a significant boost to the economy.

The statistics bureau is due to release August inflation data later on Monday.

Analysts polled by Reuters expect annual inflation of 11.9 percent, and predict Bank Indonesia will raise its key interest rate again, by 25 basis points, at its monetary policy meeting later this week, marking the fifth hike this year.

Bank Indonesia has raised interest rates by a total of 1 percentage point to 9.0 percent to contain inflation.

Boediono declined to comment on the outlook for interest rates, but said the central bank would use all monetary tools available to curb inflationary pressures, which mainly stem from higher fuel and food prices.

While the United States and Europe face the prospect of slowing growth or even recession, and a crisis in the financial system, Indonesia can afford to tackle inflation using monetary tightening without having to worry about the impact on GDP growth or weakness in the domestic financial system, Boediono said.

"We are fortunate as our financial system is okay so that it is easier to make decisions compared to other countries," he said.

"In my view, we only have to face one problem," said Boediono, who like many Indonesians only uses one name. For Indonesia, "the issue here is really about inflation."

Even though current real domestic interest rates -- the difference between inflation and nominal interest rates -- are negative, Boediono said that was not a problem for Indonesia and was common in other countries in the region.

He also said the central bank does not target a specific level for the rupiah, even though market players believe Bank Indonesia has intervened in the market to keep the currency at around 9,100 per dollar in order to curb imported inflation.

On Aug. 5, the central bank forecast annual consumer inflation at between 11.5-12.5 percent at the end of 2008, easing to 6.5-7.5 percent next year. Annual inflation spiked after the government hiked subsidised fuel prices by an average of nearly 30 percent in May.

Indonesia has been largely isolated from the impact of the financial market turmoil in the United States, as its commercial banks have relatively small exposure to the U.S. debt market.

Many of the local banks are relatively well-capitalised following a costly bailout in the wake of the 1997-98 Asian financial crisis.

Inflation July 2008

The Consumer Price Index (CPI) in July 2008 was 111.59 or inflated 1.37% from June 2008 at 110.08. In July 2008, the changes of each expenditure group as follows: the food stuff increased from 116.44 to 118.59 or inflated 1.85%; the prepared food, beverages, cigarette and tobacco increased from 109.38 to 110.55 or inflated 1.07%; the housing, water, electricity, gas and fuel increased from 108.03 to 109.97 or inflated 1.80%; the clothing increased from 108.61 to 109.49 or inflated 0.81%; the health increased from 106.20 to 106.95 or inflated 0.71%; the education, recreation and sport increased from 104.99 to 106.82 or inflated 1.74%; and the transportation, communication and financial services increased from 109.50 to 110.28 or inflated 0.71%.

The inflation in July 2008 was mainly caused by price increases of several commodities, i.e.: household fuels, purebred chicken meat, purebred chicken eggs, urban transportation fare,
fresh fish, elementary school education fees, red chili, gold accessories, cement, passenger plane fare, rental house fee, gasoline, secondary school education fees (SLTA), cooked rice & side dishes served together, cooked noodle, academy/university tuition, filter cigarette, brick, secondary school education fees (SLTP), wall paint, leasing house fee, soto (special soup), housemaid cost, string bean, study guidance, wages of labor, clove-flavored cigarette, iron rods for reinforced concrete, medicine by prescription, cucumber, coconut, green chili, kangkung, sate, ice, sand, kindergarten education fees, apple, lumber, preserved fish, fried chicken, soft drink, and orange. Meanwhile, the prices of the following commodities were decreased, i.e.: shallot, cooking oil, cassava leaves, and carrot.

Inflation May 2008

Consumer Price Index (CPI) in May 2008 experienced an increase (inflation) of 1.41% (m-t-m). The figure is lower than April 2008 inflation (0.57%). The annual inflation growth (y-o-y) amounted to 10.38%, higher than April 2008 inflation of 8.96%. The calendar year inflation in May 2008 amounted to 5.47% (y-t-d). Please click the attachment for the summary. Source: Statistics Indonesia (BPS)

Indonesia inflation rises 10.38% in May on fuel price hike

Indonesia's annual inflation accelerated in May to its fastest pace in 20 months after the government raised fuel prices to deal with a ballooning subsidy bill amid high global crude oil prices, raising worry the central bank may hike interest rates for the second time this year.

The consumer price index rose 10.38 percent in May from a year ago and was up .41 percent from April, said Rusman Heriawan, chairman of the Central Bureau of Statistics. The inflation figures were within market expectations. Nine economists polled by Thomson Financial had expected consumer prices to rise between 0.5 percent and 2.24 percent over the month and between 9.4 percent and 11.29 percent year-on-year.

On May 24 the government raised fuel prices by an average 28.7 percent. Heriawan said the effect of the fuel price hike will still be felt in June 'but the magnitude may be smaller.' Heriawan said the fuel price hike triggered increases in transportation costs. As a result, the cost of transportation, communications and financial services in April rose 2.23 percent from the preceding month.

Fresh food prices in April rose 1.72 percent from March while prices of processed food, beverages and tobacco were up 0.86 percent. Heriawan said housing, water, electricity, gas and fuel costs surged 1.58 percent; healthcare costs rose 0.69 percent; and the cost of education, recreation and sports gained 0.37 percent.

The only CPI component that recorded a decline in April was clothing, where prices fell 0.16 percent from March. Analysts have said Bank Indonesia may have to hike its key interest rate, called the BI rate, to 9.0 percent by the year-end from the current 8.25 percent to rein in soaring inflation.

Source: forbes.com

Publication date: 6/3/2008

Indonesia inflation rises at fastest pace since September 2006

Jakarta (ANTARA News) - Indonesia's annual inflation accelerated at its fastest pace in more than one and a half years in April, driven by rising kerosene prices and a lower base last year, the government said on Friday.

The consumer price index (CPI) rose 8.96 percent in April from a year ago and was up 0.57 percent from March, Rusman Heriawan, chairman of the Central Bureau of Statistics, said at a news briefing.

"There was a shift (in inflationary pressure) from food to non food in April," he said.

Kerosene is widely used by poor Indonesian families but to reduce subsidy spending the government is encouraging poor families to switch to the cheaper liquefied petroleum gas.

The annual increase was the fastest since September 2006 when consumer prices rose 14.55 percent.

Heriawan said annual inflation could exceed 9.0 percent in May.

In March, inflation rose 8.17 percent from a year earlier and was up 0.95 percent from February.

The April figures were largely within market expectations. Ten economists polled by Thomson Financial had forecast a rise of 8.5 percent to 9.0 percent on year, and 0.2 percent to 0.5 percent for the month.

Heriawan attributed the higher annual inflation figure to the lower base in April 2007 when consumer prices dropped 0.16 percent. (*)

Indonesia's year on year inflation reaches 8.96% in April

JAKARTA, Indonesia's year on year inflation in April (April 2008 to April 2007) reached 8.96 percent, the National Statistic Bureau announced Friday.

Head of the bureau Rusman Heriawan said the inflation rate in April was 0.57 percent.

It was driven by the hikes of prices of goods and services, including unprocessed foods by 0.55 percent, processed foods, drinks cigarette, tobacco 0.86 percent, housing, water, electricity, gas and fuel 1.62 percent, health 1.88 percent, education, recreation and sport 0.13 percent, he said.

The cumulative inflation rate by April was 4.01 percent, said Heriawan.

Inflation occurred in 37 out of 45 cities, he said.

Indonesia Inflation, March 2008

Consumer Price Index (CPI) in March 2008 experienced an increase (inflation) of 0.95% (m-t-m). The figure is higher than February 2008 inflation (0.65%). The annual inflation growth (y-o-y) amounted to 8.17%, higher than February 2008 inflation of 7.40%. The calendar year inflation in March 2008 amounted to 3.41% (y-t-d).

Inflation of core components in March 2008 was 0.87% (m-t-m) or contributing 0.49% to the general Inflation. The inflation growth of core components for the calendar year (y-t-d) amounted to March 2008 was 3.18%. The yearly inflation (y-o-y) of core components was 8.07%.

Source:

Indonesia Central Bureau of Statistics (BPS)

Indonesian inflation quicker than expected last month.

by Peter Charalambous

Indonesia’s inflation has quickened to its fastest pace for over 18 months during March as a result of higher food and energy prices; as a result the central bank has less room to maneuver by reducing the interest rates to boost the economy.

During the period consumer prices increased 8.2 percent from last year, which was 0.7 above the median forecast and in general food prices have risen by 13.6 percent last month.

Due to record prices of wheat, soybeans, corn and palm oil stable foods such as noodles, bread and processed food had been affected causing increased imports from neighbors India and the Philippines.

Core inflation, which excludes food prices also accelerated to the tune of 8.1 percent in March, and as Rupert Prioe-Wandesforde a senior economist at HSBC in Singapore said: “there are a lot more inflationary pressures in the system waiting to come through” and so a continued combination of rising food prices and the possible cut of integral government fuel subsidies may plunge the economy into turmoil and spur inflation by another 10 percent by 2009.

Alongside this current period of acceleration inflation comes the prediction by the Bank Indonesia, which expects economic growth to slow to pre 1996 levels.

Other signs points towards a downturn and increased inflationary pressures such as the money supply growing by 18.9 percent from a year ago whilst wholesale prices increased by 21.9 percent over the same period and according to Jim Walker, chief executive officer of Asianomics Ltd “they have fueled expansion in money and basically they are creating their own problem, as they are probably the worst country in the region for failing to recognize that there is a problem brewing.”

Indonesia inflation expected to rise in March; BI to keep rate on hold

Jakarta (ANTARA News) - Indonesia's annual inflation is expected to have accelerated in March which should prompt the central bank to keep its key interest rate on hold, economists said.

On a monthly basis, the consumer price index may reflect a slowdown, given that food prices reached abnormally high levels in recent months on the back of record global commodity prices, according to estimates by most economists polled by Thomson Financial.

"I think the danger about the CPI data is that although it is easing on a monthly basis, the annual rise is even higher. That will spark negative sentiment," said Anton Gunawan, an economist at Bank Danamon Indonesia.

The government will release the inflation data on Tuesday.

Forecasts for inflation by 10 economists polled by Thomson Financial range from 0.21 percent to 0.5 percent in March from February. In February, the CPI was up 0.65 percent from the previous month.

Year-on-year, CPI is expected to show a rise of between 7.37 percent and 7.63 percent, following the 7.4 percent increase in February.

One basic assumption for a month-on-month slowdown is the decline in rice prices following the start of the harvest season this month in some parts of the country, said Destry Damayanti, an economist at Mandiri Securities.

"I think some food components like spices, cooking oil, still rose but not as strongly as in the previous month. We may also see pressure from kerosene prices during the month," Bank Danamon's Gunawan said.

Kerosene prices in some cities were driven higher by scarce supply as a result of the government's program to replace non-subsidized kerosene, which is used mostly by poor families for cooking, with liquefied petroleum gas to reduce its burden of oil subsidies.

Apart from the fall in rice prices, fiscal measures such as the removal of import tax on wheat and soybean should have also helped stabilize food prices, said Eric Sugandi, an economist at Standard Chartered Bank.


Monetary implications

Amid threats of mounting prices, the central bank is expected to keep its key interest rate unchanged in April, instead of giving in to expectations for a rate cut, economists said.

Bank Indonesia's benchmark rate has been steady at 8.0 percent over the last four months, a level viewed by many as high enough to contain inflation in the coming months.

"Like many central banks across the region, BI is likely to remain patient in the face of growing uncertainties surrounding the conflicting pressures of accelerating inflation versus a potential global economic slowdown, " said David Cohen, an economist at Singapore-based Action Economics.

The threat of rising food and energy prices will continue to fuel inflation going forward, making it difficult to cut interest rates, said Mandiri's Damayanti.

"I don't see BI easing rates should inflation stay above 7.0 percent, although toward the latter part of the year we must reassess the situation" said Gundy Cahyadi, an economist at Ideaglobal Ltd in Singapore.

Damhuri Nasution, an economist at Danareksa Research Institute, said Bank Indonesia will certainly keep the BI rate steady to maintain real interest rates in the range of 1.5 percent to 2.0 percent.

Eric Sugandi of Standard Chartered said in the event the central bank finds a reason to cut its rates, the earliest it would do so would be in May, when food prices are expected to ease.

Damayanti said she is maintaining her year-end inflation forecast at 7.5 percent and the BI rate at 8.0 percent. (*)

Indonesia's Feb inflation rises, rates seen on hold

The rupiah was little changed at 9,115 per dollar at 0830 GMT after the data, while the stock market's Indonesia Composite Index .JKSE was down 2.7 percent on the day, compared with a fall of 2.2 percent before the figures were released.

The rupiah has strengthened about 3 percent this year against a broadly weak U.S. dollar.

RATES ON HOLD

Most economists expect the central bank to keep its benchmark rate at 8.0 percent when it holds its monetary policy meeting on Thursday, despite the rupiah's strength and expected rate cuts by the U.S. Federal Reserve.

"BI (Bank Indonesia) is not seen having room to pull off rate cuts later this week, simply because inflation has not been tamed convincingly and the central bank cannot afford to undermine the rupiah at this juncture," said Vishnu Varathan, an economist at Forecast Pte Ltd in Singapore.

The central bank kept the BI rate steady at 8.0 percent in February because of high inflation. The rate has fallen from a peak 12.75 percent in late 2005.

The statistics bureau also reported that Indonesian exports rose 33.2 percent in January from a year earlier after a 13 percent rise in December. The rise was well above the 19.9 percent forecast in a Reuters poll.

Imports grew 43.9 percent in January, higher than the 30.0 percent forecast in the poll. It compared with a rise of 36.8 percent in December.

The trade surplus was $3.48 billion, higher than a forecast of $3.2 billion.

RI`s January 2008 inflation hits four-year high of 1.77 pct

Jakarta (ANTARA News) - Indonesia`s monthly inflation rate hit a four-year record high of 1.77 percent in January 2008, driven by an increase in the prices of foodstuffs, processed food and clothing, the Central Bureau of Statistics (BPS) said Friday.

"When we look at inflation rates in recent years particularly January they always reach more than 1 percent. The cause is not only internal factors such as distribution but also global factors such as the higher prices of foodstuffs including soybean and rice on the international market," BPS Deputy Chief for Distribution and Service Statistics Ali Rosidi said on Friday.

In the past five years, monthly inflation rates in January were always above 1 percent. On-month inflation rate was 1.43 percent in January 2005, 1.36 percent in January 2006, 1.04 percent in January 2007 and 1.77 percent in January 2008, he said.

"Monthly inflation rate hit a record high of 1.99 percent in January 2002. I don`t remember what happened in that year. The figure further fell. In the period of 2005-2008 monthly inflation always reached more than 1 percent," he said.

The increase in the prices of foodstuffs, processed food and clothing contributed 2.77 percent, 2.02 percent and 2.31 percent respectively to January 2008`s inflation rate. The country recorded a monthly inflation of 1.10 percent in December 2007. January 2008`s inflation brought the year-on-year inflation rate to 7.36 percent, Rosyidi said. He said inflation happened in all of the 45 cities surveyed.

"The highest city-wise inflation rate, 5.02 percent, occurred in Palangkaraya and the lowest, 0.1 percent, in Manado." Indonesia`s full-year inflation rate in 2007 stood at 6.59 percent or higher than the target of 6.1 percent set in the revised 2007 state budget. For 2008, the government has set its inflation rate target at 6 percent while Bank Indonesia (the central bank) had projected it at 5-plus-minus-1 percent.(*)

Indonesia's January inflation rate to remain high on rising food prices

JAKARTA (Thomson Financial) - Indonesia's consumer price index is expected to remain high in January compared to the previous month driven by rising prices of food products, according to economists polled by Thomson Financial.

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

Indonesian Inflation December 2007

Consumer Price Index (CPI) in December 2007 experienced an increase (inflation) of 1.10% (m-t-m). Such result was higher from that of November 2007 which experienced a lower inflation of 0.18%. The annual inflation growth (y-o-y) amounted to 6.59%, lower compared to annual inflation in November 2007 of 6.71%. The calendar year inflation for 2007 was relatively the same as 2006 which amounted to 6.60% (y-t-d).

Please see the attachment for complete release.

Source: Central Statistics Agency