Annualized inflation slows down in August<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Annualized inflation in August slowed down compared to the
\nprevious month as a slower increase in the prices of basic food
\ncommodities, the largest contributor to inflation, put a brake on
\ninflationary pressure.<\/p>\n
The milder inflation should help ease pressure on Bank
\nIndonesia to push interest rate up. A higher interest rate
\nenvironment could impede the country's economic growth as bank
\nloans to finance business and consumption activities become more
\nexpensive.<\/p>\n
The Central Statistics Agency (BPS) announced on Wednesday
\nthat inflation as measured by the consumer price index (CPI) in
\nAugust rose 6.67 percent from the same month last year, slower
\nthan the annualized inflation rate of 7.20 percent registered in
\nJuly. Prices of all commodities and services increased
\nparticularly as the rupiah weakened against the U.S. dollar.<\/p>\n
The weaker inflation added to the bullish sentiment in the
\nstock market, where the Jakarta Stock Composite Index gained by
\n2.7 percent.<\/p>\n
BPS said that on-month inflation in August grew 0.09 percent
\nfrom the level in July mainly due to higher cost of housing and
\neducation. Prices of basic food commodities during the month,
\nhowever, declined by 2.13 percent. No explanation was given for
\nthe decline.<\/p>\n
Inflationary pressure has been on the rise during the past
\nprevious months particularly due to the weakening of the rupiah
\nagainst the U.S. dollar, which made the cost of importing raw
\nmaterials became more expensive, thus putting pressure on prices
\nto move up. Indeed, the government has recently revised upward
\nits inflation target for this year to 7 percent from the original
\nforecast of 6.5 percent to better reflect the current development
\nin the rupiah and rising international oil prices.<\/p>\n
The rising inflation has weakened consumers purchasing power,
\nwhich in fact contributed to a slowing down of economic growth
\nduring the second quarter as household consumption had been the
\nmain driver of the economy.<\/p>\n
The slower economic growth has created a dilemma for the
\ncentral bank as it struggles to push interest rate up in a bid to
\nhelp curb inflationary pressure.<\/p>\n
After keeping its benchmark interest rate unchanged at 7.37
\npercent two weeks ago, Bank Indonesia on Wednesday slightly
\nincreased the interest rate on one-month SBI promissory notes to
\n7.38 percent.<\/p>\n
The interest rate on the three-month SBI notes was unchanged
\nat 7.31 percent. An increase in the three-month rate would raise
\nthe burden of the government in servicing its huge domestic
\nbonds, whose rates are linked with the three-month SBI notes.<\/p>\n
Analysts forecast a year-end benchmark rate of not more than 8
\npercent.<\/p>\n
Elsewhere, BPS said that the cost of education in August rose
\nby 5.10 percent on-month mainly due to a rising school tuition
\nfees at the start of the new school year.<\/p>\n
Housing costs increased by 0.65 percent; transport and
\ncommunications 0.40 percent; while prices of processed foods,
\nbeverages, tobacco and cigarettes rose 0.35 percent.<\/p>",
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