Inflation in May increased by 0.21 percent

Inflation in May increased by 0.21 percent

The Jakarta Post, Jakarta

The Central Statistics Agency (BPS) said on Monday that
inflation in May rose by 0.21 percent from the previous month,
due to an increase in the prices of goods and services.

BPS said that last May, the inflation rate stood at 6.91
percent, lower than the annual rate of 7.4 percent posted in
April 2003. The agency said that the annual inflation rate in May
was the lowest so far this year.

BPS said that the prices of processed foods, beverages,
cigarettes and tobacco increased by 0.01 percent; housing costs
by 0.76 percent; clothing by 0.35 percent; health costs by 0.81
percent; and transportation and communications costs by 0.03
percent.

Meanwhile, BPS said that the price of fresh produce and meats
were down by 0.28 percent.

Inflation has largely been under control so far, thanks to a
stronger exchange rate of the rupiah against the U.S. dollar,
which makes imported goods cheaper.

The higher monthly inflation rate in May should not pose a
threat to the government's annual target, as the appreciation of
the rupiah should keep prices relatively stable.

Bank Indonesia Governor Burhanuddin Abdullah said on Monday
that the central bank was targeting an inflation rate of 8.8
percent for this year because of the stronger rupiah.

The relatively low inflation environment has allowed the
central bank to continue to reduce its benchmark interest rate.
The interest rate on one-month Bank Indonesia SBI promissory
notes is now hovering at 10.40 percent, compared to around 17
percent earlier last year.

The lower SBI rate should help ease the burden of the
government in servicing its huge domestic debt. However, the
lower rate has so far failed to push banks to lend more money to
the corporate sector, which is vital for stimulating economic
growth.