Bloomberg News

Indonesia’s Inflation Slows, Providing Room to Keep Rate Steady

October 03, 2011

Oct. 3 (Bloomberg) -- Indonesia’s inflation slowed in September, giving the central bank room to leave interest rates unchanged as global growth slows.

Consumer prices rose 4.61 percent last month from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with an inflation rate of 4.79 percent reported earlier for August and the 4.86 percent median of 17 estimates in a Bloomberg News survey.

Europe’s debt crisis and a struggling U.S. recovery are clouding the outlook for Asia’s exports and prompted policy makers from Malaysia to Taiwan leave interest rates unchanged last month. Easing prices may increase Bank Indonesia’s readiness to lower borrowing costs and protect growth after Deputy Governor Hartadi Sarwono signaled last month that the central bank has room to cut rates if inflation “behaves.”

“Price pressures remain manageable,” Eugene Leow, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. “Uncertainty over the global economy implies that commodity prices will remain lackluster. This will help keep a lid on headline inflation.”

Indonesia’s rupiah fell about 3 percent last month even as the central bank said it would buy bonds and intervene to support the currency “until the market cools.”

Bank Indonesia kept the benchmark reference rate unchanged at 6.75 percent for a seventh month in September. Policy makers are ready to “adjust the rate and mix monetary policy toward loosening” if price gains slow and the economy expands less than expected due to a global slowdown, Perry Warjiyo, the bank’s director of economic research, said last month. The next rate decision will be announced Oct. 11.

Consumer prices gained 0.27 percent in September from the previous month, today’s report showed. Core inflation slowed to 4.93 percent, compared with a previously reported 5.15 percent pace a month earlier.

Indonesia’s exports rose 37.1 percent in August from a year earlier, the statistics department said in a separate report today. That compares with the 39.5 percent pace reported earlier for July.

--With assistance from Manish Modi in New Delhi and Berni Moestafa in Jakarta. Editors: Shamim Adam, Greg Ahlstrand

To contact the reporters on this story: Novrida Manurung in Jakarta at; Widya Utami in Jakarta at

To contact the editor responsible for this story: Stephanie Phang at

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