Inflation in year end expected to reach 5-6%: BI
The Jakarta Post, Jakarta
The central bank forecasts that inflation will continue to ease in times to come on a stable rupiah, with a year-end figure estimated to hover at around 5 percent to 6 percent, governor Burhanuddin Abdullah said on Thursday.
The figures are way lower than the 2003 state budget estimate of 9 percent.
"In the first seven months of the year, accumulated inflation stood at 1.29 percent, which is the lowest level in 20 years.
"And now that the rupiah has stabilized despite the bombings, it will be feasible to forecast that inflation by the end of the year would only reach 5 percent to 6 percent," Burhanuddin said.
Last week, the Central Statistics Agency (BPS) reported that the relatively stable prices of consumer goods -- some goods even posted a decline in prices -- eased inflationary pressure in the first seven months of the year, keeping the annual inflation rate in July at a record low of 1.29 percent.
Burhanuddin said he was upbeat on the inflation outlook upon learning that the impacts of recent bombing at JW Marriott Hotel, which killed 14 people and injured 149, had so far been contained. This is evident in the quick return of the rupiah and stock market to their levels before the tragic event.
"The impacts of the blasts proved to be temporary. The market reaction, highlighted by the rupiah's stability, justifies that," he added.
Tuesday's powerful blasts in the heart of the capital shocked investors' confidence, sending the currency and equity markets stumbling on panic selling at the day's closing trading.
However, the markets gradually regained their footing and recovered.
On Thursday, the index ended up 2.8 percent at 508.27, above the closing level of 503.94 on Monday, while the rupiah ended at 8,590 per dollar, up from Wednesday's close of 8,600 but still lower than Monday's closing level of 8,490.
The recovered rupiah would surely ease inflationary pressure as the prices of imported consumer goods remained largely stable.
Another factor in the upbeat assessment was that globally, inflation rates showed a declining trend, with some countries, particularly developed ones, even experiencing deflation, he said.
The depreciation of the U.S. dollar against its global peers has helped support the trend, which is deemed beneficial as it can help boost spending as well as provide enough reason for banks to lower their interest rates.
The lowering of interest rates would eventually help generate more active economic activities, thus accelerating global economic recovery, Burhanuddin said.
Indonesia will not be different.
Based on this latest development, Burhanuddin was optimistic that Bank Indonesia would be able to maintain its current monetary policy with its twin goal of maintaining monetary stability and stimulating economic growth.
The central bank has rapidly been guiding down its benchmark rate since the beginning of the year so as to achieve the goal. Currently, the rate is at 9.08 percent, much lower than around 13 percent in January.