Indonesia’s Inflation Eases

JAKARTA ~ Indonesia’s annual inflation eased slightly in June to 5.77 percent, beating market expectations and signaling a possible further drop in interest rates, official data and analysts said.

The consumer price index (CPI) for Southeast Asia’s largest economy rose 0.23 percent last month from May, Central Bureau of Statistics deputy chairman Pietojo said.

The rise was curbed by clothing prices dropping 0.43 percent, he said.

In May, the CPI rose 0.10 percent from April and was up 6.01 percent year-on-year.

Raw food prices in June rose 0.47 percent month-on-month, prices of processed food, beverages and tobacco were up 0.33 percent and healthcare prices rose 0.22 percent.

Danareksa economist Purbaya Yudhi Sadewa said the results were “certainly better than the market expected. This is the first time this year that the CPI year-on-year came in below six percent.”

He said that with inflation under control, the central bank should have leeway to further cut its benchmark Bank Indonesia rate by 25 basis points at its policy meeting later this week.

The BI rate currently stands at 8.50 percent.

Since May last year, the central bank has cut the BI rate by a cumulative 425 basis points.

Last month’s 25 basis point cut was due to the prospect of inflation hitting the bank’s target this year of 5-7 percent, and for next year of 4-6 percent.

Rates were dramatically hiked up at the end of 2005 when a fuel price rise saw inflation soar.

Meanwhile Indonesia’s May trade surplus ran at US$3.22 billion in May, little changed from April’s $3.21-billion surplus as both exports and imports rose, Pietojo said.

Exports valued at $9.71 billion were 9.7 percent higher in May than in April while imports, worth $6.49 billion, were 14.92 percent higher.

Pietojo said the value of oil and gas exports had risen 19 percent to $1.78 billion for the month. Oil and gas imports were 16.7 percent higher at $1.89 billion.

Imports of raw materials rose to $4.96 billion from $4.22 billion in April, imports of consumer goods increased to $626.3 million from $614 million and imports of capital goods increased to $902.3 million from $808.0 million.

Indonesia’s poverty rate meanwhile dropped to 16.58 percent in March this year, down from 17.75 percent a year earlier, said Central Bureau of Statistics deputy chairman on social statistics, Arizal Ahnaf.

He said the number of people living below the poverty line – defined as being below Rp166,697 per month – declined to 37.17 million in March from 39.3 million the year earlier.

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