Inflation up in November, hope for lower rates dashed<\/p>\n
Tantri Yuliandini, The Jakarta Post, Jakarta<\/p>\n
Inflation, as measured by the consumer price index (CPI), rose
\n1.71 percent in November above the previous month's level, as
\nprices crept higher with the start of the Muslim fasting month of
\nRamadhan.<\/p>\n
The Central Bureau of Statistics (BPS) reported on Friday that
\nyear-on-year inflation in November increased to 12.91 percent.<\/p>\n
Analysts said that, with the year-end festivities looming,
\ninflation would be even higher in December, meaning full-year
\ninflation would surpass the government's 9-11 percent target.<\/p>\n
The high inflation will force Bank Indonesia to maintain its
\ntight monetary policy despite calls for a lower interest rate to
\nreinvigorate the cash-strapped business sector.<\/p>\n
BPS deputy Kusmadi Saleh said that November inflation was the
\nresult of a 1.19 percent increase in the prices of unprocessed
\nfood; a 0.24 percent increase in housing costs; processed foods,
\nbeverages, cigarettes and tobacco rose 0.14 percent; clothing
\n0.10 percent, healthcare 0.02 percent; education, recreation and
\nsports 0.01 percent; and transportation and communications 0.01
\npercent.<\/p>\n
BPS said that the cumulative inflation between January and
\nNovember was recorded at 10.76 percent.<\/p>\n
Fauzi Ichsan, an economist at Standard Chartered Bank, said
\nthat the high inflation level was likely to continue in December
\nat 2.5 percent month-on-month -- even higher than the peak
\ninflation level of 2.12 percent in July.<\/p>\n
\"In our estimation, full year inflation may reach 13 percent,\"
\nFauzi told The Jakarta Post.<\/p>\n
The central bank has been maintaining a high interest rate
\npolicy amid inflation concerns. To date, Bank Indonesia maintains
\nits benchmark interest rate at about 17.60 percent, far higher
\nthan the government assumption of 15 percent.<\/p>\n
Keeping interest rates high helps prevent the rupiah being
\nused for speculation, while at the same time eases pressure on
\ninflation.<\/p>\n
A tight money policy, however, comes at the expense of local
\nindustries being forced to scramble for access to cheaper funds.<\/p>\n
It also adds to constraints on the state budget, as a large
\nproportion of government bonds carry rates tied to the central
\nbank interest rates.<\/p>\n
BPS also reported that exports increased by 3.44 percent to
\nUS$4.47 billion in October compared to $4.32 billion in
\nSeptember, driven by higher non-oil and gas exports including
\nmining products and low-end manufacturing products.<\/p>\n
However, BPS said that cumulative exports from January to
\nOctober declined by 6.84 percent to $48.12 billion compared with
\nthe same period last year.<\/p>\n
Although the United States remains the country's biggest
\nexport destination, exports to the U.S. dropped 5.6 percent to
\n$576.4 million in October.<\/p>\n
Fauzi said that the drop was caused by the after-effects of
\nthe Sept. 11 attacks on the U.S., adding that Indonesia could
\nexpect a further slump as the rest of the world gets dragged into
\nthe recession.<\/p>\n
\"We have projected exports to decline to $57 billion next year
\nfrom total exports of $58.9 billion expected this year,\" he said.<\/p>\n
However, the export of low-end products may save the country
\nfrom an even harsher slump with people expected to turn to
\ncheaper alternatives, he said.<\/p>\n
BPS said that imports in October were down 6.20 percent to
\n$2.01 billion from $2.14 billion in September, but were 0.31
\npercent higher between January and October, reaching $26.69
\nbillion, compared with the same period last year.<\/p>\n
The trade surplus in October was at $2.46 billion compared to
\n$2.18 billion in September.<\/p>\n
The import of capital goods increased by 8.31 percent to $3.98
\nbillion between January and October this year compared with the
\nsame period last year, the BPS reported.<\/p>\n
The import of consumption goods, however, fell by 11.51
\npercent to $1.97 billion between January and October this year.<\/p>",
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