Previously, the central bank had stated that inflation could be held below the one percent mark in August. Now, however, the institution has revised its forecast. As inflation is at a worrying level (8.61 percent year on year in July), an upward revision for the August inflation outlook will contribute to negative market sentiments. Indonesia's inflation has surged recently mainly due to the increase in prices of subsidized fuels in June 2013. Bank Indonesia says that in September inflation should ease to a normal level.

According to Bank Indonesia governor Agus Martowardojo the weakening rupiah will not impact significantly on inflation (through imported inflation) because Indonesia's imports have already been experiencing a correction. The rupiah has weakened about 11 percent this year against the US dollar. It is estimated that each 10 percent fall in the rupiah will trigger about 0.75 percent of imported inflation

2013    Inflation
January      1.03%
February      0.75%
March      0.63%
April     -0.10%
May     -0.03%
June      1.03%
July      3.29%
Total      6.64%
    2008   2009   2010   2011   2012   2013
(annual percent change)
   9.8    4.8    5.1    5.4    4.3    6.6¹

¹ year to date
Source: Statistics Indonesia