Indonesia's Inflation Rate Likely Continues Rising

Jakarta, Indonesia (News Today) - Indonesia's inflation rate likely will continue rising in July on higher food and electricity prices, but the increase is unlikely to prompt the central bank to start tightening yet.

The median forecast of 10 regional economists polled by Dow Jones Newswires is for the consumer price index to rise 5.66% on year in July, speeding up from the 5.05% increase in June.

Meanwhile, the median forecast of nine economists who came up with month-on-month comparisons is for the consumer price index to gain 1.06% in July, compared with an increase of 0.97% a month earlier. The official statistics agency will release the data Monday around 0430 GMT, which will be followed by Bank Indonesia's monthly rate-review meeting on Wednesday.

Economists said that the prolonged rainy season has driven up prices of basic food commodities such as rice, onion, and chili. The government's move to raise the electricity tariff by an average of 10% this month also helped spur price increases. Compared with the previous month, prices in July would also have been boosted by the increase in education costs in the run up to the new school year.

Analysts said that the rupiah's strength against the dollar, however, helped limit imported inflation. They still expect the central bank to keep its benchmark overnight rate unchanged, given July on-year inflation is likely to come within Bank Indonesia's year-end target of between 4% and 6%.

“As inflation remains manageable--albeit accelerating--and the current BI rate is still supportive both for the rupiah and GDP growth, we expect BI to keep the BI rate unchanged at 6.50%,“ said Standard Chartered economist Eric Sugandi.

Source : kompas

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