Government forecasts drop in October inflation rate

Government forecasts drop in October inflation rate

JAKARTA (JP): The government expects inflation to lessen
significantly this month due to the strengthening of the rupiah,
Minister of Finance Bambang Subianto said on Wednesday.

"We expect milder inflation this month, lower than the 6.3
percent in August and the 3.75 percent in September," Bambang
told reporters after a meeting of economics ministers at the Bina
Graha presidential office.

He said the recent strengthening of the rupiah against the
dollar would help to contain inflation this month.

The rupiah closed at Rp 8,800 against the U.S. dollar on
Wednesday, compared to rates in excess of Rp 10,000 which
characterized trading in September.

The current downward trend in interest rates should also have
a positive impact on inflation this month, he added.

"As of October 12, we had recorded an average interest rate in
the money market of 53.27 percent, down from 66.29 percent in
September," he said, adding that interest rates on bank deposits
had dropped to an average of 51 percent from around 60 percent
over the same period.

The consumer price index, the main indicator of inflation,
rose 75.47 percent between January and September. The government
has said it hopes to contain inflation at about 80 percent this
year.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said on Wednesday that the rupiah was
likely to continue to strengthen in the weeks and months ahead.

"The current increase in the rupiah and the yen is of immense
importance... (it) shows that the two currencies have been
undervalued all this time," he said.

He attributed the rupiah's stronger position to a buying spree
of the currency on the Singapore market, citing two possibilities
for this trend.

"Either they (investors) are ready to return to Indonesia, or
they see the rupiah is getting stronger and have begun to buy
products here," he suggested.

Ginandjar said a stronger and more stable rupiah was essential
to settle the private sector's overseas debts.

He said with a stronger currency, companies would be more
inclined to join the Indonesian Debt Restructuring Agency (INDRA)
and reschedule their debts.

Ginandjar said a group consisting of 300 foreign and local
creditors and their debtors will meet on Nov. 2 and Nov. 3 for
debts negotiations.

He said the meeting would give debt-ridden local companies an
opportunity to ask for some of their dues to be written off.
(prb/das)