JAKARTA - INDONESIA'S consumer price index (CPI) in November rose 11.68 per cent from a year earlier, the Statistics Bureau said on Monday, above expectations, and analysts expect the central bank to hold rates unchanged this week.
Analysts polled by Reuters had forecast annual inflation of 11.60 per cent in November, following October's inflation rate of 11.77 per cent.
Month-on-month inflation was 0.12 percent in November against a market forecast of 0.14 per cent and compared to 0.45 per cent in the previous month. The monthly figure is not seasonally adjusted.
The majority of analysts polled before the data was released had predicted that the central bank would keep its benchmark rate unchanged at its next policy meeting, due on Thursday.
'While international oil prices have come off their lofty highs significantly, it is noted that despite the 8 per cent price cut in gasoline effective today the domestic fuel prices have not been lowered. This may have contributed to the downward stickiness in prices.'
'That said, inflation should fall off BI's radar screen given the more pressing issue of growth woes. With the recent dovish tilt from BI's comments and regional counterparts upping the ante on monetary easing, we are looking at increasing risks of a 25 bps rate cut this Thursday.'
Enrico Tanuwidjaja, Economist, OCBC bank, Singapore
'A slight deceleration in November's domestic prices would mean that local demand is still reasonably healthy despite falling global commodity prices.' 'Few factors might have painted an elevated figure, such as weakening IDR, which means imported materials would come at a higher cost, and steady local demand for goods and services.'
'BI might keep their benchmark interest rate on Dec 4, 2008, the last meeting for this year of 2008.'
'As expected, exports fell to $10.81 billion in October from $12.23 billion in September, signifying the fact that global growth slowdown has hit the demand for Indonesian exportable goods and services.'
David Sumual, Economist, BCA, Jakata
'The lower inflation rate reflected the lower prices of industrial fuel. Food prices have also come down because there is less demand.'
'I think BI's main concern is still the rupiah, and next is the loan growth which in September to October topped 30 per cent. Even if they cut the rate, demand for loans may not be big because many firms see limited prospects for expansion in 2009.'
Winang Budoyo, Economist, Bank CIMB, Niaga, Jakata
'After the festive season (during Ramadan), people return to their normal spending patterns, which means prices did not spike too high.'
'In December, inflation may inch up because of an increase of consumption during Christmas and New Year celebrations.'
'I think the BI rate may be cut because the aim now is to boost domestic expenditure as we can no longer rely on exports in the future. One of the ways to boost domestic spending is to lower rates.'
Market reaction
- The rupiah was largely unchanged 12,300 per dollar at 2.31 pm after the data was announced.
- The Indonesia Composite Index was also little changed, down 0.11 per cent after the announcement.
- A median forecast in a Reuters poll of 11 analysts was for annual inflation in November to slow to 11.6 per cent which would mark the slowest pace since June when the annual inflation rate was 11.03 per cent.
- Analysts expect the central bank to keep its key rate unchanged at 9.50 per cent at its meeting on December 4 in a bid to support the rupiah.
- Indonesia's central bank kept its key interest rate unchanged at 9.5 per cent in November, after it raised the key rate six times this year. -- THOMSON REUTERS
