Posted on 02 Jul 2013
Indonesia’s inflation rate increased less than expected in
June as the full impact of the government’s recent fuel price hike has yet to
be felt in South-East Asia’s largest economy.
Analysts expect July’s inflation numbers will better reflect the impact of Indonesia’s move to jack up subsidied petrol and diesel prices on June 22.
Some analysts expect the central bank will raise interest
rates again as early as next week.
The statistics bureau said yesterday that annual headline
inflation in June was 5.9%. That compared with May’s 5.47% and below the median
6.10% forecast in a Reuters poll.
“The full impact from last month’s fuel price hikes is
unlikely to have been priced in completely, and thus, one would expect a
markedly higher July reading,” said Gundy Cahyadi, economist for OCBC Bank in
Singapore. “We still think that Bank Indonesia may adjust its (benchmark) rate
higher by 25 basis points this month.”
Aldian Taloputra, economist at Mandiri Sekuritas in Jakarta,
expects hikes of 25 basis points in the benchmark rate at Bank Indonesia’s July
11 meeting and again in August. He sees inflation peaking at about 8.2% in
July.
Chua Hak Bin of Bank of America Merrill Lynch said he expected
inflation to peak at 8.5%–9.5% by September–October, and that the benchmark
rate will be increased another 25 basis point.
Until last month, the central bank had held the rate steady
at 5.75% since February 2011. In mid-June, it surprised the market by raising
both the overnight deposit facility rate and benchmark rate by 25 basis points,
in an effort to contain rising inflation expectations and support the weak
rupiah.
