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October inflation surges to 17.9% on fuel JAKARTA - Indonesia's inflation rate jumped to a six-year high after the government increased fuel prices, putting pressure on the central bank to raise interest rates today. Stocks and the rupiah fell. Consumer prices climbed 17.9 percent in October from a year earlier after a 9.1 percent rise in September, the Central Statistics Bureau said today in Jakarta. That's faster than the median forecast of 13.3 percent in a Bloomberg survey.

The rupiah slumped to a four-week low on concern President Susilo Bambang Yudhoyono's Oct. 1 fuel price increases will stoke inflation and slow growth in Southeast Asia's biggest economy. Central bank policy makers may raise rates for the fifth time this year after a regular meeting was brought forward by two weeks, analyst Irvin Patmadiwiria said.

" This is very bad news,'' said Patmadiwiria, head of research at PT Batavia Prosperind Aset Manajemen in Jakarta, which manages about $150 million of assets including stocks and bonds. "Bank Indonesia today may raise its key rate by 1 point to 12 percent and this may trigger investors to sell assets.''

Indonesia's key stock index fell, reversing gains after the release of the inflation report. The Jakarta Composite Index fell 8.12, or 0.8 percent, to 1058.10 at the midday trading break, after gaining 1 percent earlier today. The rupiah fell 0.7 percent to 10,185 against the dollar. The currency may extend this year's 9 percent slide, the second-worst among the 15 Asia-Pacific currencies tracked by Bloomberg after the Japanese yen, on concern the central bank will raise interest rates to head off inflation, slowing growth.

Rupiah's slump

The rupiah slumped to a four-year low in August as surging oil prices drained the country's finances and boosted demand for dollars. Indonesia, the only member of OPEC that is a net oil importer, has capped fuel prices for the past three decades. Policy makers are meeting today to discuss measures to stem inflation, Bank Indonesia spokesman Rizal A. Djaafara said.

"The board of governors meeting has been brought forward to today from Nov. 15 as the board wants to asses macroeconomic indicators before the Eid al-Fitr holiday,'' he said by telephone in Jakarta. Indonesia celebrates Eid-ul Fitr, which commemorates the end of the month of Ramadan, on Nov. 3 and Nov. 4. Indonesia's financial markets will close tomorrow through Nov. 8.

"A higher interest rate and rising inflation will slow down household consumption and we still have to watch out for the bird flu, which could slow down spending further,'' Lee Heng Guie, an economist at CIMB Securities Sdn. in Kuala Lumpur, said before today's announcement.

Rate rises

Indonesia's central bank on Oct. 24 raised its 2005 inflation estimate to 14 percent from 12 percent, its second revision this month. Bank Indonesia raised its key rate, used as a reference for its bill sales, by a full-point to 11 percent on Oct. 4, the fourth increase in nine weeks. The central bank's one-month bill, known as the Sertifikat Bank Indonesia, or SBI, last yielded 11 percent in May 2003.

Yudhoyono's government almost tripled kerosene prices and more than doubled diesel tariffs on Oct. 1. Gasoline prices rose by 88 percent. The move will help the government cap subsidies this year at 89.2 trillion rupiah ($8.7 billion). Indonesia's inflation rate reached a 26-month high of 8.8 percent in March after the government increased fuel prices by an average of 29 percent to cut subsidies.

October's 17.9 percent inflation rate was the highest since the statistical office changed its base year for the compilation of the consumer price index to 2002. Excluding the change in the base year, the rate is the highest since June 1999, when inflation reached 24.5 percent. A separate report today showed exports rose to $7.28 billion in September, from $7.24 billion a year earlier. Imports rose to $4.9 billion, from $4.2 billion. The trade surplus widened to $2.38 billion in September from $1.63 billion in August.



Posted in Economy @ 01 November 2005 07:01 CET by Jeroen · 'Blog' RSS feed · permalink






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