Bloomberg News

Indonesia Inflation Eases, Providing Scope to Keep Rates Low

February 01, 2012

(Updates with comment from economist in fourth paragraph.)

Feb. 1 (Bloomberg) -- Indonesia’s inflation slowed for a fifth straight month in January, bolstering the case for the central bank to keep interest rates low as global growth falters.

Consumer prices rose 3.65 percent last month from a year earlier after climbing 3.79 percent in December, the Central Bureau of Statistics said in Jakarta today. The median estimate of 24 economists surveyed by Bloomberg News was for a 3.61 percent increase.

Asian policy makers have shifted their focus to encouraging growth rather than stemming inflation, as Europe’s sovereign debt woes increase the risk of another global recession. Bank Indonesia, which cut borrowing costs twice in the final quarter of 2011, has kept the benchmark rate unchanged at 6 percent in the past two policy meetings while widening the lower range of its interbank lending rate to push borrowing costs lower.

“Despite inflation staying soft, we think BI may continue to err on the side of caution and keep its rate unchanged next week, although recent export data look worrying enough,” Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore, said after the report. “Exports growth continued to fall, and certainly doesn’t bode well for growth prospects going forward.”

The rupiah fell 0.1 percent in Jakarta today after the report, according to prices from local banks compiled by Bloomberg. The currency gained 0.8 percent last month.

Consumer prices climbed 0.76 percent in January from the previous month, today’s report showed. Core inflation eased to 4.29 percent, compared with a previously reported 4.34 percent pace for December.

Exports rose 2.2 percent in December from a year earlier, the statistics department said, the slowest rate of increase in more than two years. Imports rose 24.3 percent in December. The country had a trade surplus of $859 million in December, compared with a median forecast for $1.85 billion in a Bloomberg News survey of 16 economists.

Indonesia’s exports may reach $230 billion this year as the government plans to boost sales to Africa, Eastern Europe and Central Asia to counter weaker demand from Europe, Deputy Trade Minister Bayu Krisnamurthi said Jan. 24.

--With assistance from Berni Moestafa, Eko Listiyorini and Hidayat Setiaji in Jakarta and Manish Modi in New Delhi. Editors: Rina Chandran, Greg Ahlstrand

To contact the reporter on this story: Novrida Manurung in Jakarta at

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

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