Indonesia Inflation


Indonesia: Inflation rises for the first time since August

December 1, 2010

In November, consumer prices added 0.60% over the previous month. The figure came in above both the 0.06% price rise observed in October and market expectations, which had seen prices rising 0.29%. The acceleration was particularly due to higher prices for food and clothing. Owing to the pronounced price increase, annual inflation jumped from 5.7% in October to 6.3% in November. Moreover, the trend is pointing upwards, as last year's low inflation figures are no longer included in the calculation of the annual average inflation rate, pushing this figure to 4.8% (October: 4.5%). Meanwhile, at its most recent meeting on 4 November, the Central Bank left the benchmark rate unchanged for the 15th consecutive meeting at 6.50%, in a decision broadly expected by the market. Monetary authorities have repeatedly stated their preference to use other monetary instruments to control both inflation and capital inflows. The Central Bank is likely to keep interest rates at the current historic low for the time being, with first hikes expected for the second quarter of 2011. The Central Bank has an inflation target of 5% 1% for this year and next, and is confident inflation will remain broadly contained within this range.


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