Indonesia's inflation accelerated to a 20-month high last month, heightening expectations the central bank will need to raise interest rates before an increase in fuel costs further spurs price gains.
Consumer prices rose 10.4 percent from a year ago, after increasing 9 percent in April, the Central Statistics Bureau said in Jakarta yesterday. Economists expected a 9.9 percent gain.
Bank Indonesia may raise its policy rate this week as it anticipates a jump in prices from transporting food and supplies across the world’s largest archipelago, following last month’s 29 percent average increase in energy costs.
“Bank Indonesia won’t just rely on interest-rate policy to control inflation,” said Destry Damayanti, an economist at PT Mandiri Sekuritas in Jakarta. “It will also try to maintain exchange rate stability and absorb money supply.”
The rupiah has fallen 5.2 percent in the past 12 months, making it the second-worst performing among Asia’s 10 largest economies.
The Indonesian currency is “modestly” undervalued and gains may help the central bank slow inflation, said Milan Zavadjil, assistant director of the IMF’s Asia-Pacific department.
Bank Indonesia may raise its policy rate by half a percentage point after the surge in prices, Robert Prior-Wandesforde, a senior economist at HSBC Holdings Plc in Singapore, said in a note to clients.
“One consequence of the likely rapid rate hikes will be to squeeze 2009 growth which is likely to be well below Bank Indonesia’s 6.3 percent forecast,” he said.
The IMF also expects Indonesia’s central bank to keep raising borrowing costs.
Bank Indonesia lifted its key rate by a quarter of a percentage point from 8 percent on May 6, the first increase since December 2005. Bank policymakers meet on Thursday.
The central bank forecasts inflation to accelerate to between 11.5 percent and 12.5 percent by year-end, Governor Boediono told lawmakers yesterday.
RUSSIA HEATS UP
Meanwhile, Russian inflation may accelerate to 14 percent this year and the risk of the economy overheating is mounting, an IMF official said yesterday.
“The risk is that inflation gradually increases to such a level that it requires a sharp tightening of monetary policy that could cause a slowdown in growth,” Poul Thomsen, head of the IMF mission in Russia, told reporters in Moscow.
The risk of the economy “overheating” is increasing, he said.
The economy of the world’s largest energy exporter grew 8.1 percent last year, stoking inflation that accelerated to an annual 11.9 percent, more than three percentage points higher than the government’s target.
The economy may expand 7.8 percent this year as oil prices remain high, further threatening inflation, Thomsen said.
“If demand grows by 15 percent in real terms in an economy with potential growth of around 7 percent, you are rapidly using up what spare capacity is available out there and you will see growth of inflationary pressures,” he said.
The IMF doesn’t expect any “serious impact” on Russia from global financial-market turmoil, Thomsen said.
Swedish Member of Parliament Hampus Hagman is pushing for changing the name of the nation’s trade office in Taipei to signal improved relations with “Asia’s perhaps foremost democracy.” Hagman on Wednesday last week proposed renaming the Swedish Trade and Invest Council to “Sweden’s Office in Taipei,” following similar changes by other nations. The Swedish Trade and Invest Council, part of Business Sweden, is owned by the Swedish government and Swedish industry. Taiwan and Sweden share important values such as respect for democracy, human rights, the rule of law and freedom of speech, Hagman said in the motion, adding that the two nations
TWO CASES: The five allegedly conspired with conglomerates, threatening the nation’s governance and subverting the rules of ethical conduct, a deputy chief prosecutor said Taipei prosecutors yesterday charged three legislators and one former lawmaker with contravening the Anti-Corruption Act (貪污治罪條例) in a case linked to former Pacific Distribution Investment Co (太平洋流通) chairman Lee Heng-lung’s (李恆隆) battle with the Far Eastern Group (遠東集團) over ownership of the Pacific SOGO Department Store (太平洋崇光百貨) chain, while independent Legislator Chao Cheng-yu (趙正宇) was indicted in a separate case involving two funeral services companies and a plot of land in a national park. Chinese Nationalist Party (KMT) legislators Chen Chao-ming (陳超明) and Sufin Siluko (廖國棟), Democratic Progressive Party (DPP) Legislator Su Chen-ching (蘇震清) and former New Power Party legislator
PENGHU INSPECTION: Taiwan cannot let its enemies strut around in its airspace, Tsai said, one day after a Chinese spokesman denied a median line exists in the Taiwan Strait Following China’s assertion on Monday that there is no “median line” in the Taiwan Strait, President Tsai Ing-wen (蔡英文) yesterday pledged to defend the nation’s airspace during a visit to an air force base in Penghu, saying that Taiwan cannot allow others to flex their military muscle in its territorial airspace. Tsai praised the “heroic performance” of the pilots of the Indigenous Defense Fighters who have been intercepting Chinese People’s Liberation Army Air Force planes in recent days. “I have a lot of confidence in you. As soldiers of the Republic of China [ROC], how could we let enemies strut
EFFICIENCY: The rules for Philippine arrivals were revised after 17.6% of arrivals with symptoms tested positive, compared with 0.7% of those with no symptoms Starting today, Chinese spouses who hold a reunion permit can apply to enter Taiwan and travelers without symptoms from the Philippines do not need to be tested for COVID-19 upon arrival, but are to be tested after a 14-day quarantine, the Central Epidemic Command Center (CECC) said yesterday. Minister of Health and Welfare Chen Shih-chung (陳時中), who heads the center, said that from today, Chinese who are married to a Taiwanese citizen and hold a reunion permit can apply to the National Immigration Agency for entry into Taiwan. Chinese who are married to a foreign national and hold an accompanied reunion permit