Indonesia: Inflation drops slightly in February
March 1, 2011
In February, consumer prices added 0.13% over the previous month. The rise, which was below the 0.89% price rise observed in January, mainly reflected higher health costs, although falling food prices helped to curb the monthly increase. As a result, annual inflation decelerated slightly from 7.0% in January to 6.8% in February and came in below market analyst expectations, which had seen inflation increasing to 7.3%. Annual average inflation rose from 5.4% in January to 5.7% in February, continuing the upward trend that began in May 2010. Although inflation remains elevated, the Central Bank decided to maintain the benchmark rate at 6.75% at its most recent meeting on 4 March. The dovish stance taken by the Bank broadly matched market expectations. Nevertheless, the Bank stressed that further tightening of monetary policy will be taken into consideration, as high inflationary pressures prevail. The Central Bank set an inflation target of 5.0% 1% for this year and 4.5% 1% for 2012.