Indonesia Inflation Rate Climbed for a Third Month as Harvest Season Ends

Indonesia’s inflation rate climbed for a third month in June as the end of the harvest season crimped food supplies, an increase that may not be sufficient to trigger an interest-rate increase next week.

Consumer prices rose 5.05 percent last month from a year earlier after gaining 4.16 percent in May, the Central Bureau of Statistics said in Jakarta today. The median forecast in a Bloomberg News survey of 17 economists was for a 4.46 percent increase.

Indonesia’s central bank, which will review its monetary policy on July 5, has lagged behind Malaysia, India and Taiwan in raising borrowing costs this year. The rupiah has risen 12 percent against the dollar in the past year as investors poured money into an economy where the benchmark interest rate is 6.5 percent, compared with Japan’s 0.1 percent, helping cap import prices and contain inflation.

“Inflationary pressures in the coming months remain low, giving no reason for the central bank to increase interest rates,” Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta, said in a telephone interview before today’s report. “Bank Indonesia hasn’t yet demonstrated any strong concern over inflation and we don’t expect them to do so anytime soon.”

Policy makers in Southeast Asia’s largest economy will probably keep the country’s benchmark rate unchanged at 6.5 percent next week, according to all 14 economists in Bloomberg News survey. The measure is at the lowest level since it was introduced in July 2005.

Rupiah, Harvest

Bank Indonesia has left the rate unchanged since August last year to support the economy, even as neighboring Malaysia and Australia raised borrowing costs to avert asset bubbles and tame inflation amid a global rebound from last year’s slump. That’s helped support demand for goods and services including homes built by PT Bakrieland Development, Indonesia’s second- largest property developer by assets.

Indonesian consumer prices rose 0.97 percent in June from the previous month after rising 0.29 percent in May.

The end of the harvest season in the main rice-producing regions in Java island in May caused the price of rice to increase, Arman said.

The cost of rice, the staple for Indonesia’s 235 million people, rose 5 percent to 8,500 ($0.93) a kilogram on June 29 from June 1, according to data from PT Food Station Tjipinang Jaya, Indonesia’s biggest market for the grain.

Indonesia’s exports rose 36 percent to $12.52 billion in May from a year earlier after gaining 42.6 percent in April, the statistics office said.

To contact the reporter on this story: Aloysius Unditu in Jakarta at aunditu@bloomberg.net; Novrida Manurung at nmanurung@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.