Bank Indonesia: Inflation Likely to Ease below 1% in August 2013
Indonesia's central bank expects that the country's monthly inflation rate will ease to below one percent in August. However, in order to meet this expectation the bank stresses that there needs to be an improvement in the food product supply through imports and good distribution practice. The latter, particularly, is problematic due to Indonesia's lack of quality and quantity in infrastructure. In July, monthly inflation rose 3.29 percent due to the start of the new school year and impact of higher subsidized fuel prices.
In September 2013, inflation is expected to ease to a traditionally average September inflation rate (between 0.00 to 0.20 percent).
According to data from Statistics Indonesia, higher food prices (including raw food and prepared food products) contributed about 43 percent to total inflation in 2012. Regarding geographic location, Java (and Jakarta in particular) account for the largest portion of food product inflation.
Despite the currently high headline inflation of 8.61 percent (year-on-year), Indonesia's benchmark interest rate (BI rate) is expected to be kept at 6.50 percent at tomorrow's (15/08) Bank Indonesia Board meeting. In the previous two months, the BI rate has been raised twice in order to mitigate higher inflation and to support the weakening rupiah.
(annual percent change)
¹ year to date
Source: Statistics Indonesia