Indonesian Inflation Accelerates in August as Electricity Costs Increase

Indonesia’s inflation rate climbed to the highest level in 16 months as electricity costs increased after the government raised power prices this quarter.

Consumer prices rose 6.44 percent last month from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with a 6.22 percent gain in July reported earlier. The median forecast in a Bloomberg News survey of 18 economists was for a 6.69 percent increase.

Bank Indonesia has chosen to strengthen growth rather than respond to faster inflation, holding out as counterparts including South Korea, India and Malaysia raised borrowing costs. Policy makers have said the country’s faster inflation in recent months was temporary, while an appreciating currency may temper price increases.

“The global economic outlook has worsened in recent weeks, and this may temporarily strengthen Bank Indonesia’s pro-growth bias,” Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta, said before the release. “We think Bank Indonesia will hike starting November, when the evidence on inflation becomes more compelling.”

Indonesia’s inflation rate may be more than 6 percent for the whole of 2010, central bank Governor-designate Darmin Nasution said yesterday. Inflation next year may be about 6 percent, he said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email