Indonesia's central bank (Bank Indonesia) expects that Indonesia's inflation rate in August will reach about 1.3 percent (month to month), implying that the annual inflation rate will exceed 8.9 percent (year on year) in the same month. Prices of several commodities and horticultural products are still not showing a decrease in prices. These products include beef, chicken meat and onions. Thus, Bank Indonesia requests that the central and regional governments take great care in safeguarding the country's food supplies.
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
(annual percent change)
¹ year to date
Source: Statistics Indonesia