Indonesia’s inflation slowed for the first time in four months as prices eased after the Eid Al-Fitr festival, supporting the central bank’s decision to hold off interest-rate increases as exports slump.
Consumer prices rose 4.31 percent from a year earlier last month, after a previously reported 4.58 percent gain in August, the statistics bureau said in Jakarta today. The median forecast of 18 economists in a Bloomberg News survey was for a 4.6 percent increase.
Bank Indonesia kept its benchmark interest rate at a record-low 5.75 percent for the seventh straight meeting in September as accelerating economic growth and inflation reduced the scope for monetary easing to counter faltering overseas sales. The Organization for Economic Cooperation and Development said last week Southeast Asia’s biggest economy should be ready to tighten monetary policy as faster expansion boosts prices.
“Today’s data releases should partly assuage over-heating and current-account shortfall concerns,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Fading festive demand has seen September headline CPI soften and could ease pressure on the BI to tighten policy levers.”
The rupiah fell 0.1 percent to 9,598 per dollar as of 2:55 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency was the worst performer in the past three months among 11 Asian economies tracked by Bloomberg.
Food and transportation prices eased after the Eid celebration, said Suryamin, chairman of the statistics bureau. Exports remain “under pressure” due to the crisis in Europe that has affected India and China, he said.
“There will still be some concerns whether high fuel or food prices globally,” as well as a weaker rupiah and strong growth will translate into higher prices, said Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore. “Since domestic demand is doing pretty well, I would say there might be some risk of tightening.”
Consumer prices rose 0.01 percent last month from August, today’s report showed. The core inflation rate was 4.12 percent, compared with a previously reported 4.16 percent pace in August.
Exports in August fell 24.3 percent from a year earlier, after a revised 7.6 percent decline in July, the statistics bureau said. That makes it the worst contraction since at least June 2009, according to data compiled by Bloomberg, before any official revisions. Imports slid 8 percent.
The trade surplus was $249 million in August, compared with a revised $264 million shortfall the month before.
“Of particular concern would be the import growth figure, as it indicates that domestic demand may be moderating further into the year-end,” said Gundy Cahyadi, a Singapore-based economist at Oversea-Chinese Banking Corp. “This could very well mean that a downward revision to our current 6.2 percent GDP growth forecast for 2012 may be necessary.”
Indonesia’s exports in the January-to-August period declined to $127.2 billion from the same period a year earlier, according to the statistics bureau. It may be difficult to reach even $200 billion in overseas sales by year-end on account of volatile demand due to Europe’s debt crisis, Satwiko Darmesto, an official at the statistics bureau told reporters.
The central bank said on Aug. 9 it expects the economy to grow as much as 6.5 percent this year, higher than the OECD’s forecast of 6 percent expansion.