[Kabar-indonesia] Indonesian inflation plunges, interest rate cut seen [4 articles]

[Joyo at aol.com]

4 articles:

- Indonesia Oct CPI Plunge Makes Rate Cut Likely

- Indonesian inflation plunges, interest rate cut seen

- Indonesia Oct CPI +0.86% On Mo; Mkt Expected +0.84%

- Indonesia Min: Oct CPI Indicates Economy Has Stabilized

Indonesia Oct CPI Plunge Makes Rate Cut Likely

By I Made Sentana and Farida Husna Of DOW JONES NEWSWIRES

JAKARTA, November 1 (Dow Jones)--Bank Indonesia is likely to
make its sixth cut this year in its benchmark one-month rate
next week after Indonesia's on-year inflation rate fell to a
single digit for the first time in over a year, analysts
said Wednesday.

According to the official Central Statistics Agency, the
consumer price index rose 6.29% in October from a year
earlier, sharply down from September's 14.55% rise, and was
up 0.86% on month, higher than September's 0.38% gain.

October's core inflation, which excludes prices controlled
by the government, was 6.86%, down from 9.13% in September.

"The (CPI) data reflects the sharp narrowing from the high
base effect created by the inflation spike last October,"
said David Cohen, an economist at Action Economics.

"This should endorse the (monetary) easing moves by Bank
Indonesia and allow them to proceed with further cuts...they
can point to this data and see justification for lower
rates."

On-year inflation soared to 17.89% in October 2005 from
9.06% the previous month as fuel prices effectively doubled
after the government slashed budget-busting subsidies.
Inflation peaked at 18.38% in November 2005, but has
steadily declined in response to monetary tightening that
began in the last half of 2005.

But the tightening also slowed the economic growth and Bank
Indonesia began loosening policy in May. Since then it has
cut the benchmark Bank Indonesia one-month rate 200 basis
points to 10.75%. It last moved in October when it lowered
the rate by 50 basis points.

Bank Indonesia's Board of Governors next meets on Nov. 7.

Action Economics' Cohen expects Bank Indonesia to cut its
benchmark one-month rate by 50 basis points in both November
and December respectively.

JPMorgan economist Sin Beng Ong said: "It seems to us the
October (inflation) numbers could prime the central bank to
cut the benchmark rate...up to 75 basis points (in
November)."
Ong said he expected the benchmark one-month rate to decline
to 9.50% by end-2006.

The forecasts fall roughly in line with Bank Indonesia's own
estimates. Central bank deputy governor Aslim Tadjuddin said
last month the one-month rate could decline to 9.00%-9.50%
by the end of 2006 on a forecast fall in on-year inflation
to 7.00%-8.00%.

Meanwhile, Coordinating Minister for the Economy Boediono
said Wednesday's inflation data indicate Indonesia's economy
has stabilized and that inflation will continue falling to
the "regional norm" of around 3.00%-4.00% in the next few
years.

The government has forecast 2006 gross domestic product
growth of 5.8%, but a slightly sluggish 4.97% expansion in
the first half increased pressure on the government to
intensify monetary and fiscal measures to spur growth.

President Susilo Bambang Yudhoyono Wednesday said GDP will
grow at least 5.6% this year.

Other official data issued Wednesday indicated a slight
slowing in the country's recent robust trade performance.

Indonesia's trade surplus narrowed slightly to $3.12 billion
in September from $3.27 billion in August.

That decline hinged on an increase in oil product imports to
supply demand during the Ramadan holiday period, analysts
said. The value of imported petroleum products in September
rose 10.9% on-month to $1.22 billion in September from $1.1
billion in August due to heightened consumer demand during
the one-month holiday, which ended in Indonesia on Oct. 23.

A decline in the average Indonesian crude oil price to
$62.49 per barrel in September from $72.82/bbl a month
earlier also weighed on Indonesia's September export
performance, agency data indicated.

Total exports declined 1.2% in September from a month
earlier to $8.78 billion.

The value of exports of petroleum products dropped to $204.2
million in September from $279.2 million in August, and
natural gas exports fell to $771.9 million from $908.1
million in the same period.

"Trade remains pretty healthy...and this (latest data)
should allow (Bank Indonesia) to cut rates without any
danger of weakening the rupiah (against the U.S. dollar),"
JPMorgan's Ong said.

The total trade surplus for the January-September period was
up 48% to $27.84 billion from $18.84 billion a year earlier.

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Indonesian inflation plunges, interest rate cut seen

By Adriana Nina Kusuma
JAKARTA, Nov 1 (Reuters) - Indonesia's annual inflation rate
plunged to 6.29 percent in October, giving the central bank
room to cut interest rates again now that the impact of last
year's surge in fuel prices has faded.

The news was in line with economists' predictions of a 6.33
percent year-on-year rise in the consumer price index (CPI),
well down from September's 14.55 percent annual increase.

"This confirms my earlier belief that there's still room for
adjusting our monetary policy stance," chief economics
minister Boediono told Reuters on Wednesday. "There is still
room for relaxing a little."

The annual inflation rate jumped in October last year to
17.9 percent from 9.06 percent in September as the
government cut fuel subsidies after global prices soared,
more than doubling domestic prices. Inflation had remained
in double digits since.

However, the October 2006 CPI was compared to the level
following the year-ago fuel price rise, so the annual rate
of increase dropped dramatically <IDIND2>.

Despite the sharp drop in inflation, most analysts expect
the central bank to limit a cut in its benchmark BI interest
rate target <BIPG> to 50 basis points at most at its next
rate review on Nov. 7 to maintain confidence in the rupiah.
Such a cut would take the BI rate to 10.25 percent.

"I think Bank Indonesia will cut the BI rate by 25 basis
points, or even by 50 basis points, so by the end of the
year the rate will likely be at around 10 percent," said
Jakarta-based economist Fauzi Ichsan of Standard Chartered
Bank.

"There are concerns that too quick a cut in interest rates
would hurt the rupiah. But I think, as long as inflation
remains really low while on the fiscal front the government
is able to contain the budget deficit, there should be no
excessive worries on the exchange rate," he said.

The rupiah lost as much as 9 percent against the dollar in a
single day in August last year due to worries about the cost
of fuel subsidies and fears that the central bank was
reacting too slowly to soaring world oil prices.

But analysts said the government's ability to contain the
budget deficit, forecast at 1.3 percent of gross domestic
product this year, should mitigate the risks of
macroeconomic instability and prevent significant capital
outflows arising from sharp interest rate cuts.

So far this year the rupiah <IDR=> has risen 8 percent,
helped by the yield advantage arising from high central bank
interest rates.

It was quoted at around 9,100 per dollar after the data. On
the stock market, the Jakarta Composite Index <.JKSE> ended
up 0.5 percent at 1,589.9.

Singapore-based economist Leslie Khoo of financial firm
Forecast PTE said the improvement in inflation would be
maintained and he was even more bullish on interest rates.
"The base effect will continue to keep the year-on-year rate
in the single digit region in the next two months," he said.

"This gives BI (Bank Indonesia) room to cut the rate
further. We expect it to cut the key rate by 50 basis points
in each of the remaining meetings (this year). The key rate
will reach 9.75 percent at the year-end."

The statistics bureau said the annual rate of core
inflation, which excludes volatile items such as food, eased
to 6.86 percent in October from 9.13 percent in September.

It also said Indonesia's exports in September rose 16.8
percent from a year earlier to $8.78 billion, partly due to
steady exports of minerals and commodities. However, that
was below expectations centring on a 19.30 percent increase.

Imports rose a little over 15 percent in September from a
year earlier to $5.66 billion, below market expectations of
a 16.07 percent gain.

That left a trade surplus of $3.12 billion in September,
lower than a forecast of $3.22 billion and compared with a
surplus in September 2005 of $2.60 billion.

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Indonesia Oct CPI +0.86% On Mo; Mkt Expected +0.84%

JAKARTA, November 1 (Dow Jones)--Indonesia's consumer price
index climbed at a slower-than-expected pace of 6.29% on
year in October, the official Central Statistics Agency said
Wednesday.

On month, the CPI rose 0.86%, agency chairman Rusman
Heriawan told reporters at a media briefing.

In September, inflation was 14.55% on year and 0.38% on
month respectively.

Core inflation - which excludes prices that are controlled
by the government such as energy and food - was 6.86%, a
slowdown from 9.13% in September.

October on-year inflation was slightly below the average
forecast of seven regional economists of 6.30% on year. They
expected on-month inflation of 0.84%. [ 01-11-06 0702GMT ]

The data mark the first time Indonesia's on-year CPI has
fallen to the single-digit level since September 2005, as
the economy shakes off the inflationary impact of a sharp
spike in fuel prices 12 months ago, analysts said.

On-year inflation soared to 17.89% in October 2005 from
9.06% the previous month due to the government's move to
effectively more-than-double fuel prices to slash budget-
busting subsidies.

The on-year CPI peaked at 18.38% in November 2005, but has
steadily declined in response to monetary tightening that
began in the last half of 2005.

The October data indicate Indonesia's economy is "clear from
the impact of the October (2005) fuel price increase,"
Heriawan told reporters at a press briefing.

Heriawan said the October CPI results will raise optimism
that on-year inflation will be 7.00%-8.00%, in line with
official forecasts.

October's on-year CPI result will heighten anticipation that
Bank Indonesia's Board of Governors will respond to falling
inflation with a cut in the benchmark one-month rate, now at
10.75%, at a regular monthly meeting Tuesday.

The central bank has cut its benchmark one-month rate five
times since monetary policy unwinding began in May.

The seasonal mild uptick in on-month inflation in October is
highly unlikely to deter Bank Indonesia in continuing with
its rate-cut cycle, analysts said.

The increase in on-month inflation last month was linked to
a seasonal increase in food prices, Heriawan said.

On-month inflation in October is subject to an annual
consumption spike during the Islamic fasting month of
Ramadan, which ended in Indonesia this year on Oct. 23.

Although Ramadan requires observant Muslims to refrain from
eating and drinking from dawn to dusk, Indonesians break the
daily fast with lavish banquets and late-night eating sprees
that substantially boost consumption during the month.

October 2006 On-Month Inflation By Sector Housing and energy
+0.26% Food
+2.17% Processed food, beverages  and cigarettes   +0.64%
Health
+0.29% Education
+0.10% Clothing
+1.00% Transportation and Communications             +0.46%

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Indonesia Min: Oct CPI Indicates Economy Has Stabilized

JAKARTA, November 1 (Dow Jones)--A sharp slowdown in October
on-year inflation to the single digit level indicates that
Indonesia's economy has "stabilized," Coordinating Minister
for the Economy Boediono said Wednesday.

Official data issued earlier Wednesday indicated on-year
inflation was 6.29% in October, significantly less than
September's 14.55%, as the economy shook off the impact of a
spike in fuel prices 12 months ago.

The government's challenge is to ensure that easing
inflation doesn't turn into deflation "like in Japan,"
Boediono told reporters.

"To prevent that, the government will keep the macroeconomy
stabilized according to commodity supply and demand," he
said on the sidelines of an infrastructure investment
conference. [ 01-11-06 0822GMT ]

The October data indicate inflationary pressure has been
largely tamed since peaking at 18.38% onyear in November.

The inflationary surge prompted the authorities to tighten
monetary policy beginning in the second half of 2005.

Analysts say October's inflation data will prompt the
central bank to cut its benchmark one-month rate - now at
10.75% - by as much as 75 basis points at a monthly board of
governors meeting Tuesday.

Last month, Bank Indonesia Deputy Governor Aslim Tadjuddin
said the benchmark one-month rate will likely decline to
9.0%-9.5% by the end of 2006, in tandem with an expected
slowdown in inflation to 7.00%-8.00% in the same period.

Indonesia's annual gross domestic product will grow 6.00%-
7.00% annually for the next few years, Boediono said in a
speech at the conference.

The government has targeted 2005-2009 annual economic growth
of 6.6%, and projects 5.8% growth in 2006, compared with
last year's 5.6%.

In a speech Wednesday, President Susilo Bambang Yudhoyono
said the economy will grow by at least 5.6% in 2006.

Boediono said Indonesia's on-year inflation will likely slow
to around the "regional norm" of 3.00%-4.00% in the next few
years.

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Joyo Indonesia News Service
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