Indonesia’s Inflation Eased in August But Sees Ressure From Rising Fuel Prices

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Official data on Thursday showed Indonesia’s inflation rate fell more than expected in August, but economists expect higher inflation and higher rate hikes amid expectations of higher fuel prices. said.

President Joko Widodo is considering raising subsidized fuel prices to curb the expansion of energy subsidies amid soaring global oil prices and a declining rupiah.

Indonesia’s inflation rate fell to 4.69% in August from 4.94% the previous month, due to a fall in some food prices, according to data from the Central Bureau of Statistics. A Reuters poll predicts he will hit 4.90% in August.

However, annual core inflation, which excludes government-controlled prices and volatile food prices, rose to 3.04% in August from 2.86% in July, the highest since November 2019.

August’s rate is broadly in line with his 3% forecast in polls.

Bank Indonesia (BI) has targeted inflation of 2% to 4% in 2022 and 2023, with Governor Perry Warjiyo saying this year and next year are likely to exceed that range. increase.

BI last month raised its benchmark rate by 25 basis points (bps) for the first time since 2018. Some economists say it was taken in anticipation of higher fuel prices.

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Margo Yuwono, head of the Central Bureau of Statistics, said a significant increase in fuel prices could increase price pressure as it affects the prices of other goods and services.

Bank Mandiri’s Faisal Rachman said inflation this year could reach 6%, assuming subsidized gasoline prices rise by 30%.

“We still see room for BI to raise [the benchmark rate] to 50bps for the remainder of 2022,” he said.

Bank Danamon economist Irman Faiz said rising costs are also putting pressure on producers to raise prices at the consumer level. He expects a total of 75 bps of rate hikes for the remainder of his 2022 by the BI.

BI’s next policy meetings are Sept. 21 and he’s Sept. 22.

Officials have not given a timeframe for when the fuel price hike will occur. The president on Thursday told media that the government was still cautiously calculating the impact of the price hike.

A lawmaker told Reuters last week the government was considering raising subsidized fuel prices by his 30% to his 40%. – Reuters

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