Indonesia inflation spikes on fuel hike

Indonesia inflation spikes on fuel hike

JAKARTA - Indonesia's annual inflation rate spiked slightly more than expected in November after fuel prices were hiked, but economists said the central bank does not need to raise rates again anytime soon.

The statistics bureau said on Monday the annual headline rate was 6.23 per cent, compared with October's 4.83 per cent and above a Reuters poll forecast of 6.06 per cent.

On Nov. 17, President Joko Widodo increased fuel prices more than 30 per cent. Traditionally in Indonesia, hikes spur a chain of price rises because of higher transport costs.

Right after fuel prices went up, Bank Indonesia increased its policy rate by 25 basis points to 7.75 per cent.

Many expect inflation to be higher in December and January, but November's surge did not spur concern.

Inflation is "nothing too worrisome at this juncture," said Gundy Cahyadi of DBS Bank in Singapore, who expects a peak of 7.8 per cent, likely in January.

The central bank might raise rates again "but there is no strong reason to do that now", Cahyadi said.

When Indonesia raised fuel prices in mid-2013, inflation neared 10 per cent and the central bank raised its benchmark rate 1.75 percentage points over six months, hurting growth.

This time, inflation is not expected to near double-digits.

Bank Indonesia has predicted the annual inflation of around 7.9 per cent at the end of the year while Finance Minister Bambang Brodjonegoro sees 7.3 per cent.

Gareth Leather of Capital Economics in London agreed a rate hike is possible in coming months "however given that the spike in inflation will be temporary, we do not expect to see an aggressive tightening of monetary policy."

TRANSPORTATION FACTOR

The head of Indonesia's statistics bureau, Suryamin, said inflation "shouldn't spike too high" in December if the government can maintain the prices of rice, chillies and transportation.

Transportation, which accounts for 19.1 per cent in Indonesia's inflation basket, increased 4.29 per cent in November from a month earlier.

Also on Monday, Indonesia reported a $23.2 million trade surplus for October, smaller than the poll's $70 million projection but a swing from September's $270 million deficit.

In January-October, exports were $148.06 billion, 1.1 per cent lower than a year earlier. The trade deficit for the first 10 months was $1.65 billion, compared with $6.38 billion in the same period of 2013.

Aldian Taloputra, economist at Mandiri Sekuritas in Jakarta, said the trade outlook was "positive but not by much. We forecast either small surpluses or small deficits in the coming months."

More about

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.