Tue, 01 Feb 2011


By Novrida Manurung and Widya Utami
Feb. 1 (Bloomberg) -- Indonesia’s inflation accelerated in January, putting pressure on policy makers to consider raising the benchmark interest rate from a record low in coming months even as they may avoid an increase when they meet on Feb. 4.

Consumer prices in Southeast Asia’s biggest economy rose 7.02 percent last month from a year earlier, after a 6.96 percent gain reported earlier for December, Central Bureau of Statistics data showed in Jakarta today. That’s more than the 6.81 percent median forecast in a Bloomberg News survey of 21 economists.

“While supply and distribution of rice were still triggers for inflation in January, consumer-price pressure eased slightly because the seasonal factor ended in December,” Eric Alexander Sugandi, a Jakarta-based economist at Standard Chartered Plc, said Jan. 27. “Core inflation remained stable, and that gives the central bank an opportunity to hold the interest rate.”

Bank Indonesia has kept its policy rate at a record-low 6.5 percent since August 2009, delaying an increase that could attract more funds at a time when emerging markets are luring investment. Still, the central bank has signaled it may be getting ready to consider a move as core inflation accelerates.

“We are ready to raise the interest rate at an appropriate time,” Governor Darmin Nasution said in response to reporters’ questions in Jakarta Jan. 14. “How much will we increase? It depends on the inflation level.”

Import Duty

The government removed the import duty on wheat, flour, soya beans, rice and livestock feed for as long as one year to help stabilize prices. The import duty on rice is removed until March, and the tariff on soybeans and wheat flour are lifted until December, Bambang Permadi Brodjonegoro, head of fiscal policy at the Ministry of Finance, said Jan. 27.

Core inflation may be 4 percent to 5 percent this year, Brodjonegoro said.

Consumer prices in Indonesia climbed 0.89 percent in January from the previous month. Core inflation was 4.18 percent in January, easing from 4.28 percent the previous month.

Indonesia’s exports rose 25.7 percent in December from a year earlier, the statistics office said. Imports surged 27 percent.