May inflation creates new worries<\/p>\n
Dadan Wijaksana, Jakarta<\/p>\n
Prices increased faster in May than in April due to the weakening
\nrupiah and higher telephone charges, giving rise to concerns
\nabout inflation that could force the central bank to start
\nraising interest rates.<\/p>\n
The Central Statistics Agency (BPS) reported on Tuesday that
\ninflation in May rose by 6.47 percent from the same month last
\nyear, stronger than the year-on-year inflation rate of 5.29
\npercent in April.<\/p>\n
Compared to the previous month, inflation in May was up by
\n0.88 percent, the agency said.<\/p>\n
"The inflation increase in May was mainly due to rises in the
\ncost of telecommunications, transportation and basic food
\nprices," said BPS chairwoman Soedarti Surbakti during a press
\nconference.<\/p>\n
Telecommunications company PT Telkom raised local phone
\ncharges by an average of 28 percent in April.<\/p>\n
Meanwhile, the drop in the value of the rupiah against the
\nU.S. dollar has pushed up the cost of production for many
\ncompanies as they are dependent on imported raw materials.<\/p>\n
The rupiah has fallen by 11 percent so far this year due to a
\ncombination of economic uncertainties at home and overseas, and
\nalso political uncertainty ahead of the July presidential
\nelection. The local unit plunged to a 26-month low of Rp 9,380
\nper dollar on Tuesday.<\/p>\n
The BPS said that basic food prices rose by 0.55 percent in
\nthe month, while the cost of transportation and
\ntelecommunications was up by 3.88 percent.<\/p>\n
Other elements in the consumer price index (CPI) which also
\nexperienced price increases are processed food and beverages
\n(up 0.21 percent), clothing (0.02 percent), health care (0.43
\npercent), and education and recreation (0.11 percent), the BPS
\nsaid.<\/p>\n
Soedarti said that as the current weakening of the rupiah and
\nsoaring oil prices would continue to stoke up inflationary
\npressure in the months ahead, she predicted that inflation for
\nthe full year would surpass the government's 6.5 percent target.<\/p>\n
There have been increasing worries about the reemergence of
\nstronger inflationary pressures in the local economy particularly
\ndue to the weakening of the rupiah and rising oil prices.<\/p>\n
Stronger inflation could force the central bank to start
\nraising interest rates to both help curb inflation and defend the
\nlocal unit, which has been badly affected by news that the U.S.
\nFederal Reserve could start raising interest rates next month. As
\na result, investors have switched from rupiah assets to dollar-
\nbased assets.<\/p>\n
But Bank Indonesia over the past weeks has been insisting that
\nit had no plans to raise interest rates soon despite a hike in
\nthe U.S. rate. Raising domestic interest rates could harm the
\ncountry's economic growth.<\/p>\n
Some Bank Indonesia officials have actually indicated that
\nthere was still room for the central bank benchmark interest rate
\nto decrease further to around 6 percent this year from the
\ncurrent level of around 7 percent.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/may-inflation-creates-new-worries-1447893297",
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"sponsor": "Okusi Associates",
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