Indonesia's inflation eases
Tuesday, 3 January 2012
JAKARTA, Jan 2 (Reuters): Indonesia's export growth slowed to its lowest level in 25 months in November, while annual inflation eased in December, reinforcing expectations that the central bank will likely refrain from cutting rates until February.
The impact of the global cooldown on emerging Asian economies such as China showed in sharply lower growth in November exports to 8.25 per cent, the first time it has been in single digits since Sept 2009, according to statistics bureau figures.
The trade balance widened in November to $1.52 billion from $1.15 billion in October and the trade minister says export growth will likely stand in single digits in 2012.
Even so, economists said Bank Indonesia was unlikely to cut rates next week as it monitors inflation and waits to see if the global slowdown worsens.
"Inflation has not bottomed yet. January inflation can reach 3.4 per cent. But the trend is inflation will go higher, particularly if the government limits subsidised fuels in March or April," said David Sumual, an economist at Bank Central Asia.
"For this month, the BI rate will likely stay but it may be cut in February if inflation falls," Sumual said.
Analysts polled by Reuters had forecast annual inflation would ease to 3.82 per cent in December, in line with the central bank's estimate. Annual inflation in November was 4.15 per cent.
Core inflation in December also eased slightly more than expected to 4.34 per cent from 4.44 per cent in November, the statistics bureau said. The measure excludes government-controlled prices of items such as fuel and electricity and is closely watched by the central bank.
Bank Indonesia (BI) slashed its benchmark overnight rate by 75 basis points (bps) in the last quarter of 2011 to a record low 6 per cent to boost domestic consumption as exports were expected to slow amid weaker global demand.
It has set an inflation target of 3.5-5.5 per cent this year and its governor said inflation could near the upper range at 5.2-5.3 per cent if the government decided to hike electricity and subsidised fuel prices.
"The BI rate will likely stay at 6 per cent in January because there are still risk aversions, there are still pressures on the rupiah. So a 6 per cent rate is still ideal," said Eric A. Sugandi, an economist at Standard Chartered.
"We estimate at the end of the first quarter it will be cut to 5.75 per cent and remain there until the year-end," Sugandi said.
Most economists polled by Reuters expected BI's five-member board to hold the key rate steady this month, partly to assess the impact of the euro zone debt crisis and to wait for commercial banks to follow its lead by cutting lending rates to ease borrowing costs for businesses.
The impact of the global cooldown on emerging Asian economies such as China showed in sharply lower growth in November exports to 8.25 per cent, the first time it has been in single digits since Sept 2009, according to statistics bureau figures.
The trade balance widened in November to $1.52 billion from $1.15 billion in October and the trade minister says export growth will likely stand in single digits in 2012.
Even so, economists said Bank Indonesia was unlikely to cut rates next week as it monitors inflation and waits to see if the global slowdown worsens.
"Inflation has not bottomed yet. January inflation can reach 3.4 per cent. But the trend is inflation will go higher, particularly if the government limits subsidised fuels in March or April," said David Sumual, an economist at Bank Central Asia.
"For this month, the BI rate will likely stay but it may be cut in February if inflation falls," Sumual said.
Analysts polled by Reuters had forecast annual inflation would ease to 3.82 per cent in December, in line with the central bank's estimate. Annual inflation in November was 4.15 per cent.
Core inflation in December also eased slightly more than expected to 4.34 per cent from 4.44 per cent in November, the statistics bureau said. The measure excludes government-controlled prices of items such as fuel and electricity and is closely watched by the central bank.
Bank Indonesia (BI) slashed its benchmark overnight rate by 75 basis points (bps) in the last quarter of 2011 to a record low 6 per cent to boost domestic consumption as exports were expected to slow amid weaker global demand.
It has set an inflation target of 3.5-5.5 per cent this year and its governor said inflation could near the upper range at 5.2-5.3 per cent if the government decided to hike electricity and subsidised fuel prices.
"The BI rate will likely stay at 6 per cent in January because there are still risk aversions, there are still pressures on the rupiah. So a 6 per cent rate is still ideal," said Eric A. Sugandi, an economist at Standard Chartered.
"We estimate at the end of the first quarter it will be cut to 5.75 per cent and remain there until the year-end," Sugandi said.
Most economists polled by Reuters expected BI's five-member board to hold the key rate steady this month, partly to assess the impact of the euro zone debt crisis and to wait for commercial banks to follow its lead by cutting lending rates to ease borrowing costs for businesses.