[Kabar-indonesia] 4 RI Inflation Reports: Rate Cut Likely; Sept CPI Up 14.55 pct yr/yr

[JoyoNews at aol.com]

4 Reports:

- Data View: Indonesia Rate Cut Likely
  As Inflation Eases

- Instant view-Indonesia's Sept CPI up
  14.55 pct yr/yr

- Table-Details of Indonesia's September
  inflation

- Datawatch - Indonesia's September CPI
  slightly better than expected - CIMB

Data View: Indonesia Rate Cut Likely As Inflation Eases

By Farida Husna and I Made Sentana

JAKARTA, October 2 (Dow Jones)--Indonesia's inflation rate eased
slightly in September, reinforcing expectations that the country's
central bank will cut its benchmark interest rate by 25 to 50 basis
points when its board of governors meets Thursday.

The consumer price index rose 14.55% in September from a year earlier,
slower than August's 14.90% rise, the official Central Statistics
Agency said Monday.

CPI rose 0.38% from the previous month following a 0.33% on-month
increase in August.

"The (on-year inflation) number is good enough to keep the authorities
on track... for another 50 basis points rate cut on Thursday," ING
Chief Asia Economist Tim Condon told Dow Jones Newswires.

Ahead of the data, analysts had expected Bank Indonesia to continue
its monetary policy easing despite a possible slight rise in inflation
linked to the Islamic fasting month of Ramadan.

"The impact of Ramadan wasn't that big because it only began the last
week or so of September," said Citigroup economist Anton Gunawan.

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.

Bank Indonesia also indicated last week that any Ramadan-related
inflation surge wouldn't derail ongoing monetary policy loosening,
which is aimed at jump starting economic growth.

"Even though (on-month) inflation in September may be higher on
seasonal factors like the fasting month, I don't think it will be
significant...so our plans to continue to cut the interest rate (in
October) are still open," said Bank Indonesia Deputy Governor Aslim
Tadjuddin.

Tadjuddin said the benchmark Bank Indonesia one-month rate will likely
fall to around 10.00% by end-2006, from 11.25% currently. The
projection matches those of analysts who expect the benchmark rate to
decline in tandem with an easing in on-year inflation to 7.00%-8.00%
by end-2006.

On-Year Inflation To Hit Single Digit Level In October

On-year inflation is already on track to slide to the single-digit
level beginning in October, Central Statistics Agency chairman Rusman
Heriawan told reporters Monday.

"Starting from October, the on-year inflation will fall to below 10%
as inflation in October 2005 was boosted by the fuel price hike,"
Heriawan said.

The government effectively more than doubled fuel prices in October
2005 to slash fuel subsidies.

The fuel price hike caused inflation to surge to an on-year high of
18.38% in November and prompted severe monetary policy tightening by
the central bank, which only began loosening in May.

Gunawan said on-year inflation will tumble to around the 7.4% level in
October due to the low base effect.

Indonesia's policy-makers are relying on monetary policy to deliver
economic growth stimulus to help offset the impact of stubborn
inflation and stagnating fiscal spending in the first three quarters
of 2006.

The government has forecast a 5.8% rise in gross domestic growth for
2006, outpacing last year's 5.6% expansion.

But in the first six months of 2006, GDP grew only 4.97% on year,
indicating the government must intensify economic growth stimulus
measures to reach the official target.

September's core inflation, which excludes prices controlled by the
government, was 9.13%, down from 9.68% in August.

Year-on-year inflation was slightly below expectations, which centered
on a rise of 14.66%. Forecasts for on-month inflation centered on
0.46%.

"Policy-wise, it's been a virtuous circle because inflation has played
out since the spike last October while at the same time the rupiah has
remained firm (against the dollar)," Action Economics economist David
Cohen said.

The dollar eased slightly to IDR9,213 at 0806 GMT from Friday's close
of IDR9,225 due to market perceptions that the milder-than-anticipated
September inflation data would accelerate ongoing Bank Indonesia
monetary policy easing.

Other official data issued Monday show Indonesia's trade surplus
narrowed to $3.27 billion in August from $3.44 billion in July. The
trade surplus shrank due to a 4.5% on-month rise in imports to $5.62
billion.

Exports rose 0.08% to a new record of $8.89 billion in August due to
rising prices of commodities including rubber, crude palm oil and
copper, Heriawan said.

The value of imported petroleum products declined 16% on month to
$1.58 billion in August due to the recent decline in the price of
crude oil on the global market, analysts said.

The trade surplus compares with $2.08 billion in August 2005.

"Despite all the anxiety about the slowing in U.S. and global demand,
the trade data has held up nicely for Indonesia," Action Economics'
Cohen said.

Indonesia's total trade surplus in the January-August period was
$24.70 billion, 47% higher than during the same period last year.

(Phelim Kyne contributed to this story)

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Instant view - Indonesia's Sept CPI up 14.55 pct yr/yr

JAKARTA, Oct 2 (Reuters) - Indonesia's annual inflation rate fell in
September despite higher food prices at the start of the Ramadan
fasting month, government data showed on Monday, opening the 
door for more interest rate cuts.

The consumer price index in September rose 14.55 percent from a year
earlier, against market expectations for an increase of 14.62 percent
and after an annual rise in August of 14.90 percent.

The inflation rate has generally fallen since last November, when it
hit a six-year high of 18.4 percent after the government sharply
raised domestic fuel prices.

KEY POINTS:

- The statistics bureau said the annual rate of core inflation, which
excludes volatile items such as food, fell to 9.13 percent in
September from 9.68 percent in August.

- Following are the official August trade figures compared with market
forecasts and actual growth in the previous month:

                Actual August      Growth         Growth forecast      Growth
                   ($ bln)            August (%)    for August (%)          
July(%)
  Exports       8.89                 22.28              22.02                 
  23.36
  Imports        5.62                  2.37               2.82                
     7.82

COMMENTARY:

LESLIE KHOO, ECONOMIST, FORECAST PTE, SINGAPORE

"Basically, the downward trending inflation continues to pave the way
for Bank Indonesia to cut interest rates further."

"(We are) Looking for 50 basis points cut in each of the remaining meetings."

"Year end rate (is) seen at 9.75 percent versus current 11.25 percent."

ANUNG RONI, ECONOMIST, AAA SEKURITAS, JAKARTA.

"This is basically what the market expects, interest rates will
therefore fall again."

"Despite shrinking interest differentials ... Indonesia is still
attractive in the region."

HELMI ARMAN, ECONOMIST, BAHANA SEKURITAS, JAKARTA

"A 50 basis point cut is possible, despite recent pressure on the
exchange rate."

"There are indications of capital outflows recently. But this is
likely to be temporary. This is likely to be profit taking, not a
sustainable trend." "Capital inflows, however, are likely to fall but
as long as interest rate differentials remain no less than 4.5
percentage points, there is unlikely to be any significant capital
outflows. The rupiah, therefore, is likely to remain attractive."

PATRICIA LUI, MANAGING ANALYST, INFORMA GLOBALMARKETS, SINGAPORE

"Inflation continues to slow sharply in September as impact of last
October's fuel price hikes have largely dissipated by now.

"The sustained rupiah strength in September also played a key role in
curbing price pressures. BI will have little reason not to cut
one-month policy rate by another 50 basis points this Thursday to
10.75 percent.

DAVID COHEN, ECONOMIST, ACTION ECONOMICS, SINGAPORE

"The further narrowing in the consumer price index to 14.55 percent
year-on-year was another encouraging sign that inflation has been
contained."

"With a steeper narrowing awaited in October when the base effect from
the spike in fuel prices a year earlier is removed, the consumer price
index should narrow to near 6 percent year-on-year in October."

"This should allow the Bank Indonesia to proceed with further interest
rate cuts, perhaps by 25 basis points this month and another 50 basis
points next month, toward 10 percent by the end of this year."

JUNIMAN, ECONOMIST, BANK INTERNASIONAL INDONESIA, JAKARTA

"I expect BI not to cut interest rates drastically. The bank will
probably cut rates by 25 basis points because there have been some
pressure on the (rupiah) exchange rate, from 9,100 to 9,200."

"Why? As I see it foreign investors have already realised that
interest rate differential is narrowing."

"Sharp rate cut will probably happen next month after the October's
inflation figure comes out. I forecast it (inflation) would fall below
7 percent next month, allowing BI to cut the rates by 75 basis
points."

"BI rate may reach 10 percent at year end, which should help bolster
economic growth next year."

MARKET REACTION:

The rupiah <IDR=> was trading at 9,220 to the dollar compared with
around 9,227 before the data was released.

The Jakarta Composite Index <.JKSE> was down 0.38 percent at 0712 GMT,
partially recovering from a fall of around 0.66 percent before the
data was announced.

LINKS:

- For more data, Indonesia's statistics Web site is: http://www.bps.go.id

BACKGROUND

- Inflation hit a six-year high of 18.4 percent in November after the
government cut fuel subsidies and cranked up prices last October,
which dampened economic growth in the country of 220 million.

- Inflation has since eased, allowing Bank Indonesia to cut benchmark rates.

- The central bank cut its benchmark interest rate <BIPG> by half a
point to 11.25 percent in September, the fourth cut this year, after
raising it to 12.75 percent from 8.5 percent in the second half of
2005 to fight inflation and prop up the rupiah.

- But with the impact of the fuel price rises fading, the central bank
has said the rate could fall to between 10-10.5 percent by the end of
the year. It expects annual inflation to fall to around 7 percent.
(Additional reporting by Muhamad Ari)

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Table-Details of Indonesia's September inflation

JAKARTA, Oct 2 (Reuters) - Indonesia's annual inflation rate fell in
September despite higher food prices at the start of the Ramadan
fasting month, government data showed on Monday, opening the door for
more interest rate cuts.

The consumer price index in September rose 14.55 percent from a year
earlier, against market expectations for an increase of 14.62 percent
and after an annual rise in August of 14.90 percent.

The inflation rate has generally fallen since last November, when it
hit a six-year high of 18.4 percent after the government sharply
raised domestic fuel prices.

Details of annual inflation in September compared with August are as follows:

                            Sept      August      Weighting in CPI
                                                            (in percent)
 
 Raw food             15.45       15.22             24.69
 Processed food    10.28       11.41             17.62
 Housing, utilities  12.26       12.48             26.35
 Clothing                8.05         9.47               6.37
 Health                   6.27        6.85               4.31
 Education              9.72        9.27               6.18
 Transportation      30.15      30.70              14.47

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Datawatch - Indonesia's September CPI slightly better than expected - CIMB

JAKARTA, October 2 (XFN-ASIA) - Consumer price growth of 0.38 pct
month-on-month and 14.55 pct year-on-year was slightly better than
expected, as some price components including clothing showed a
contraction while processed food and transportation grew slightly less
than expected, CIMB economist Kahlil Rowter said.

Government data showed the consumer price index (CPI) for September
rose 0.38 pct from August and was up 14.55 pct year-on-year,

Food prices rose 0.62 pct month-on-month, with prices of processed
food, beverage and tobacco up 0.13 pct. Housing prices gained 0.28
pct.

Clothing prices though fell 0.13 pct month-on-month while prices of
transportation, communications and financial services contracted 0.01
pct.

Ten economists polled by XFN-Asia had projected September CPI to rise
0. 3-0.60 pct from August and to advance 14.5-14.81 pct year-on-year.

Rowter had projected a gain of 14.69 pct year-on-year and a 0.50 pct
rise month-on-month.

"The food price hike was expected as the fasting month (of Ramadan)
began in the fourth week of September. However, the food price hike
was offset by the fall in clothing prices and a slower-than-expectated
rise in processed food and transportation," Rowter said.

Typically Moslems eat richer, pricier foods when they break their fast
in late afternoon each day during Ramadan.

Rowter believes the drop in clothing prices may have been driven by a
"flood" of clothing imports in the month while smaller price increase
for processed food appears to be the result of stagnant sugar prices
in September.

Rowter also noted that a pullback in global fuel prices for industrial
users may have had a beneficial impact in limiting the overall
headline inflation rate.

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Joyo Indonesia News Service
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