Inflation softens in September<\/p>\n
The Jakarta Post\/Jakarta<\/p>\n
Inflationary pressure eased in September due mainly to lower
\nprices of basic food commodities and a relatively stable rupiah
\nduring most part of the month, the Central Statistics Agency
\n(BPS) reported on Friday.<\/p>\n
Inflation as measured by the consumer price index (CPI) during
\nSeptember rose by 6.27 percent from the level in the same month
\nof last year. This was lower than the year-on-year inflation rate
\nof 6.7 percent recorded in August.<\/p>\n
The prices of basic food commodities -- the largest weighting
\nin CPI -- fell 1.36 percent during the month to keep the overall
\nprices in check. Consequently, inflation rose only by 0.02
\npercent from the level in August.<\/p>\n
BPS chairman Choiril Maksum told a press gathering that the
\nlower food prices was partly attributed to an abundant supply of
\nrice, the most consumed-basic food commodity in the country.<\/p>\n
\"It helped offset the impact of households' larger education
\nspending of the new school-year,\" Choiril said.<\/p>\n
The costs of education, recreation and sports were up 2.02
\npercent in September.<\/p>\n
The decline in inflationary pressure in September -- the
\nsecond decline after inflation peaked a 15-month high of 7.2
\npercent in July, which exceeded the government's initial
\ninflation target of 6.5 percent for this year, should ease
\npressure for the central bank in raising its benchmark rate.<\/p>\n
A higher interest rate environment is feared to have negative
\nimpact on economic growth and also increase the burden of the
\ngovernment in servicing its huge domestic debts. The lower
\ninterest rate is expected to make bank loans cheaper to finance
\ncorporate activities and push economic growth higher this year to
\n4.8 percent as projected by the government.<\/p>\n
For the past couple of years, Bank Indonesia has been
\naggressively cutting down its benchmark rate, now standing at a
\nhistoric low of 7.39 percent.<\/p>\n
Many in the financial market have recently urged the central
\nbank to start raising the interest rate to help defend the ailing
\nrupiah and curb inflationary pressure particularly at a time when
\nthe interest rate in the U.S. is rising.<\/p>\n
But during the past couple of weeks, the central bank
\nofficials have maintained that at current level, the domestic
\ninterest rate was still attractive for investors to retain their
\nrupiah-based assets.<\/p>\n
Choiril warned, however, that stronger inflationary pressure
\ncould resume in the coming months on strong demand for goods
\nduring religious festivities.<\/p>\n
It is also feared that inflation would become stronger toward
\nthe year-end if the incoming new government decides to raise fuel
\nprices at home amid the current surge in international oil
\nprices.<\/p>\n
Inflation during the January-September period increased to 3.8
\npercent, BPS said. The government has recently revised upward its
\ninflation target for this year to 7 percent.<\/p>\n
Another reason for the mild inflation in September could be
\nthe relatively stable rupiah during the month. In July, when the
\nyear-on-year inflation hit 7.2 percent, the rupiah's weaker
\nfooting against the U.S. dollar was seen as the main reason,
\nalongside with political concerns leading up to the Sept. 20
\npresidential election runoff.<\/p>\n
A weak rupiah makes the cost of imported goods and raw
\nmaterials more expensive, thus putting pressure on local prices.<\/p>",
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