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
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