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Indonesia Inflation Quickens to 20-Month High on Food, Power

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March 1 (Bloomberg) -- Indonesia’s inflation accelerated to a 20-month high in February on higher food prices and power tariffs, reducing scope for the central bank to cut interest rates as exports falter.

Consumer prices climbed 5.31 percent from a year earlier, after a previously reported 4.57 percent gain in January, the Statistics Bureau said in Jakarta today. The median estimate in a Bloomberg News survey of 18 economists was 4.81 percent.

Bank Indonesia has held borrowing costs at a record-low 5.75 percent for a year as the inflation rate stayed above 4 percent for most of that period and a trade deficit exacerbated the currency’s weakness. Higher power tariffs and minimum wages may increase price pressures in coming months, with food prices also still elevated after floods in January.

“The pressure from some raw food prices is still there, and the other factor that has contributed to inflation is the hike in power tariffs, that has started to have an impact,” Anton Gunawan, chief economist at PT Bank Danamon Indonesia, said before the data. “Inflation may accelerate to close to the upper limit of the central bank’s target.”

The rupiah was little changed at 9,675 per dollar as of 10:00 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency is among the worst performers in the past year among 11 most-active Asian currencies tracked by Bloomberg.

Rupiah Intervention

The central bank has stepped up intervention to support the rupiah and narrow the gap between local and overseas prices, Hendar, executive director for monetary policy, said in a Jan. 28 interview. The monetary authority may take action on its benchmark rate if the currency’s depreciation causes inflation to accelerate, Deputy Governor Hartadi Sarwono has said.

Consumer prices rose 0.75 percent last month from January, today’s report showed. Core inflation was 4.29 percent, compared with a previously reported 4.32 percent pace the month before.

Exports fell 1.2 percent in January from a year earlier, a separate report showed today. Imports increased 6.8 percent in the same period, leading to a deficit of $171 million.

“Lackluster commodity prices and the softness across the globe weigh on receipts,” said Fred Gibson, a Sydney-based economist at Moody’s Analytics.

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

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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