Inflation up 10.6%

Inflation up 10.6%

The Jakarta Post, Jakarta

Inflation in August rose 10.6 percent compared to the same
month last year, the Central Bureau of Statistics (BPS) reported
on Monday.

The bureau revealed that month-on-month inflation in August
rose by 0.29 percent from July.

The BPS said that inflation during the month was mainly caused
by higher education costs linked to the start of the new school
year.

"The prices of a range of goods and services generally
increased in August," said bureau chief Soedarti Surbakti.

Education and recreation costs were up 2.54 percent month-on-
month in August, the bureau said.

Soedarti expressed optimism that the government's single digit
inflation target for this year could be achieved despite the
relatively high year-on-year inflation in August.

Year-on-year inflation has been declining over the past
several months, allowing the central bank to lower its benchmark
interest rate, which in turn helps ease the burden on the state
budget in covering the interest on government bank
recapitalization bonds.

A lower interest rate environment is also crucial for spurring
economic growth.

Fauzi Ichsan, an economist at Standard Chartered Bank, said
Bank Indonesia would continue to lower its benchmark interest
rate toward the 14-percent level as the rate of month-on-month
inflation in August continued to decline.

But he said that the government's single digit inflation
target for this year would only be achieved if the exchange rate
of the rupiah against the U.S. dollar strengthened to around Rp
8.500 per dollar. The local unit is currently hovering at around
Rp 8,840.

Elsewhere, the BPS said that in August clothing costs rose
0.18 percent from a month ago; healthcare costs 0.52 percent;
processed food, drinks and cigarettes 0.15 percent; and housing
0.8 percent.

But food costs were down 0.53 percent on the month, and
transportation and communications costs fell 0.09 percent.