[Kabar-indonesia] Indonesia June CPI +0.45% On Mo; rate cut timing eyed

[Joyo at aol.com]

4 articles:

- Indonesia June CPI +0.45% On Mo;  Mkt Expected
  +0.51%

- Data View: Indonesia June CPI Paves Way For Thu
  Rate Cut

- Indonesian inflation eases, rate cut timing eyed

- Datawatch - Indonesia June CPI data largely as
  expected - Citigroup

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Indonesia June CPI +0.45% On Mo; Mkt Expected +0.51%

JAKARTA, July 3 (Dow Jones)--Indonesia's consumer
price index climbed at a slower-than-expected pace of
15.53% on year in June, the official Central
Statistics Agency said Monday.

On month, the inflation rate was 0.45%, agency
chairman Rusman Heriawan told reporters at a press
briefing. In May, on-year inflation was 15.60% while
the on-month result was 0.37%.

Heriawan attributed the jump in on-month inflation in
June to an end-of-harvest seasonal rise in food
prices.

Core inflation - which excludes prices that are
controlled by the government, such as energy and food
- was 9.58%, an acceleration from 9.54% in May.

June on-year inflation was slightly below a Dow Jones
Newswires consensus forecast by four regional
economists of 15.58%. They expected on-month inflation
of 0.51% and core inflation of 9.50%. [ 03-07-06
0710GMT ]

Heriawan said the consumer price index rose 2.87% in
the first six months of 2006, the slowest first-half
growth for three years.

Heriawan said that on-year inflation may decline to
7.7% by the end of 2006, but cautioned that the figure
was "a very rough estimate" and not an official
government forecast

June inflation data and official expectations of an
easing in on-year inflation to single digits by the
end of the year might increase the likelihood of a cut
this week in the benchmark Bank Indonesia one-month
rate, which currently stands at 12.50%.

Bank Indonesia officials have reiterated in recent
weeks that evidence of benign inflation data will
allow the central bank to resume an easing in monetary
policy that began in May with a 25-basis-point cut in
the benchmark rate to 12.50%.

The central bank's Board of Governors will decide on
possible rate moves at a regular monthly monetary
policy meeting on Thursday.

The central bank held its benchmark rate unchanged
last month to bolster the rupiah against the U.S.
dollar amid widespread investor risk aversion to
emerging markets, including Indonesia's.

Sudden reversals in capital inflows caused the rupiah
to slip 5.5% against the greenback in May. At 0831
GMT, the dollar had eased to IDR9,150.

Analysts have predicted benchmark Bank Indonesia rate
cuts in the second half of 2006 in tandem with central
bank projections of an easing in on-year inflation to
between 7.0% and 8.0% by end-2006.

June 2006 On-Month Inflation By Sector:

Housing and energy     +0.32%

Food       +1.12%

Processed food, beverages and cigarettes +0.26%

Health       +0.27%

Education       +0.25%

Clothing       -0.08%

Transportation and Communications  +0.10%

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Data View: Indonesia June CPI Paves Way For Thu Rate
Cut

By Phelim Kyne and Farida Husna of Dow Jones Newswires

JAKARTA, July 3 (Dow Jones)--Indonesia's year-on-year
inflation eased in June from the previous month, which
will likely prompt Bank Indonesia to cut its benchmark
one-month interest rate this week, analysts said
Monday.

Indonesia's consumer price index climbed at a
slower-than-expected pace of 15.53% in June from a
year earlier, compared with a 15.60% increase in May,
the official Central Statistics Agency said.

That decline is what the central bank needs to justify
easier monetary policy, said DBS Bank Southeast Asia
economist Lim Su Sian.

The central bank's Board of Governors will decide on
possible changes to the benchmark rate at a regular
monthly monetary policy meeting Thursday.

Lim said Indonesia's economy "badly needs" cuts in
interest rates to stimulate growth, and she expects a
50-basis-points rate cut Thursday.

Bank Indonesia officials have reiterated in recent
weeks that evidence of benign inflation will allow the
central bank to resume an easing in monetary policy
that began in May, with a 25-basis-point cut in the
benchmark rate to 12.50%.

That rate cut was aimed at jump-starting domestic
consumption. The government targets economic growth of
6.2% for 2006, which would outpace a 5.6% expansion
last year.

The central bank held its benchmark rate unchanged
last month in order to bolster the rupiah against the
U.S. dollar as investors showed widespread aversion to
the risk of emerging markets, including Indonesia's.

Sudden reversals in capital inflows caused the rupiah
to slip 5.5% against the greenback in May. The dollar
has since eased, closing at IDR9,158 on Monday.

Analysts have predicted benchmark Bank Indonesia rate
cuts in the second-half of 2006 in tandem with central
bank projections of an easing in year-on-year
inflation to between 7.0% and 8.0% by the end of the
year.

The rupiah is now "well-supported" and Bank Indonesia
is likely to take advantage of the decline in June's
year-on-year inflation to cut its benchmark rate,
despite a "not particularly encouraging" rise in June
core inflation, said Tim Condon, ING Barings' chief
economist for Asia not including Japan.

June Exports Soar To Record-High

Core inflation - which excludes prices that are
controlled by the government, such as energy and food
- was 9.58% in June from a year earlier, an
acceleration from 9.54% in May.

Month-on-month, the headline inflation rate was 0.45%,
agency chairman Rusman Heriawan told reporters. In
May, the on-month result was 0.37%.

Heriawan attributed the jump in month-on-month
inflation in June to an end-of-harvest seasonal rise
in food prices.

Year-on-year headline inflation in June was slightly
below an average forecast for 15.58% in a poll of four
regional economists by Dow Jones Newswires. They
expected on-month inflation of 0.51% and core
inflation of 9.50%.

The consumer price index rose 2.87% in the first six
months of 2006, the smallest rise in three years,
Heriawan said.

He said year-on-year inflation may decline to 7.7% by
the end of 2006, but cautioned that was "a very rough
estimate" and not a government forecast.

ING's Condon expects easing inflation will allow Bank
Indonesia to cut its benchmark rate to 11.0% by the
end of the year. JPMorgan and Citigroup both forecast
a more conservative decline in the benchmark Bank
Indonesia rate to 11.50% within the same period.

Even as year-on-year inflation in Indonesia eases,
high global prices fetched by its commodity exports
are underpinning a healthy trade balance

Indonesia's trade surplus rose to $3.28 billion in May
from $2.25 billion in the same month a year earlier,
and from $2.85 billion in April, Central Statistics
Agency data released Monday indicated.

That trade surplus was powered by a record 18.1%
increase in exports to $8.34 billion in May from $7.06
billion in April.

Imports rose a milder 6.5% in May from the previous
monthto $5.06 billion.

The export growth reflected soaring prices of oil, gas
and other cash commodities as well as the success of
government initiatives aimed at slashing bureaucratic
obstacles to non-commodity exports, said Sailesh Jha,
CSFB's senior regional economist for Southeast Asia
and India.

"Some of the government's structural measures to get
logistics costs down and improve customs procedures
are making it easier for exports to get out the gate,"
Jha said.

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Indonesian inflation eases, rate cut timing eyed

By Adriana Nina Kusuma and Yoga Rusmana

JAKARTA, July 3 (Reuters) - Indonesia's annual
inflation rate eased in June as the impact of a fuel
price rise faded, data showed on Monday, increasing
the scope for the central bank to cut interest rates,
now among Asia's highest.

June inflation of 15.53 percent came in below May's
15.6 percent despite expectations for an unchanged
figure.

Analysts were divided over whether rates would be cut
as soon as this month given worries over higher global
interest rates.

A Reuters poll of 10 financial firms conducted shortly
after the data showed six analysts predicting the bank
would keep the benchmark BI rate <BIPG> steady at 12.5
percent at a meeting on Thursday, while the rest
expected a 25 basis point rate cut.

But eight of the 10 analysts polled predicted a rate
cut in August.

"I think the central bank should not cut its BI rate
in the July meeting, it should wait until the rising
trend in global interest rates has come to an end.
However, we do forecast a cut in August," said Fauzi
Ichsan, economist at Standard Chartered Bank.

The central bank said last week that an interest rate
cut was imminent but gave no specific timeframe.

"Bank Indonesia is likely to cut the interest rate by
25 basis points," said economist Anung Roni of
brokerage AAA Sekuritas, who expects a rate cut this
week.

"I don't see any problem if Bank Indonesia decides to
cut the interest rate, because of the adequate spread
with that of the Fed," he said.

INTEREST RATE STILL

The bank cut rates by 25 basis points to 12.5 percent
in early May after inflation moderated to a 7-month
low in April and at a time when the the rupiah had
strengthened. It was the first reduction since the
rate was introduced last July.

But the central bank held off lowering rates again in
June following an emerging market sell-off which hit
the Indonesian rupiah currency hard. The rupiah has
since strengthened. It was quoted at 9,155 per dollar
at 0715 GMT on Monday.

The current Bank Indonesia rate represents a spread of
7.25 percentage points ofer the U.S. Federal funds
rate of 5.25 percent, which some analysts said was
wide enough to be attractive to investors.

The statistics bureau also said annual core inflation
rose to 9.58 percent in June from 9.54 percent in May,
but analysts said there was still room for a rate cut
soon.

The core rate, which the bureau started releasing this
year, excludes volatile items such as food prices and
is used by the central bank to help guide policy.

The inflation rate has fallen from a six-year peak of
18.38 percent in November <IDIND2>, when it jumped
following a sharp rise in domestic fuel prices after
government subsidies were slashed in October, but it
is still among the highest in Asia.

Reflecting the lower impact of the fuel price hike,
transportation costs rose at an annual rate of 30.75
percent in June, slightly below May's 30.92 percent.

Bank Indonesia had earlier said it expected interest
rates to fall this year if inflation dropped in line
with its year-end target of around 7 percent.

The statistics bureau also said exports in May grew 16
percent from a year earlier, while imports grew an
annual 2 percent compared with a year earlier.

The trade surplus was $3.28 billion in May against
$2.24 billion in May last year.

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Datawatch - Indonesia June CPI data largely as
expected - Citigroup

JAKARTA, July 3 (XFN-ASIA) - The June inflation rate
of 0.45 pct month-on-month and 15.53 pct year-on-year
were within the expected range although some
components, including food prices, were either higher
or lower than forecast, Citigroup economist Anton
Gunawan

The Central Bureau of Statistics earlier today
announced that food prices, which rose 1.12 pct from
May, were the biggest contributor to June inflation.

"Overall, the headline number is still within range.
However if you look at the details, there were some
components such as food prices, housing and
transportation prices that were moving in a direction
different from what we had expected," Citigroup
economist Anton Gunawan said.

Analysts polled by XFN-Asia had earlier anticipated
that food prices would lead the consumer price index
(CPI) to rise 0.4-0.68 pct month-on-month and
15.4-15.79 pct year-on-year in June.

Gunawan said the increase in food prices was slightly
bigger than he had expected, probably due to the
impact of disasters that hit various parts of the
country in June which could have disrupted the
distribution of goods in some regions.

As for housing and transportation prices, he said the
increases were not as strong as expected which, to
some extent, helped offset the advance in food prices.

Looking at the June inflation numbers, he said there
was a 50-50 chance for Bank Indonesia to either lower
or maintain its benchmark BI rate in July.

"Theoretically, Bank Indonesia should maintain the BI
rate. However, we do know that BI is under pressure to
cut the rate by 25 basis points. There is a 50-50
chance for the central bank to maintain or cut the BI
rate this month," Gunawan said.

"In fact, the June inflation numbers were not really
as good as expected. Year-on-year inflation did fall;
however, core inflation was slightly up. It would be
more of a political decision if BI cuts the rate this
month," he said.

In addition, he said the interest rate differential
for those looking to invest in Indonesia would remain
attractive even if BI moves to reduce the rate this
month.

He said the official inflation rate target of 8 pct
this year should be achievable.

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Joyo Indonesia News Service
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