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A spike in prices of rice and gold drove inflation up last
month, posing a threat to the central bank's stated move to start
lowering interest rates to help stimulate economic growth.
The country's consumer price index increased 0.37 percent in May, the
Central Statistics Agency (BPS) reported Thursday, compared to a 0.05
percent monthly increase in April. Consumers in 37 of 45 major cities
surveyed had to pay more for the goods and services they purchased in
May from the previous month.
Comparing last month's consumer prices with their levels in May last
year, inflation is again showing an upward trend, reaching 15.6
percent, from April's year-on-year 15.4 percent and March's 15.74
percent. Accumulated monthly inflation until May stood at 2.41 percent.
Core inflation -- which excludes volatile prices like food and
regulated prices such as fuel -- was at an on-year rate of 9.54 percent
and 0.44 percent month-to-month in May.
BPS chief Choiril Maksum said last month's increase in consumer prices
occurred across the board, especially for clothing and staple foods.
"Staple food prices rose with the harvest season having ended, and the
price of rice in several areas surged due to distribution problems. A
recent rise in the price of gold also contributed to last month's
inflation."
Prices of clothing, which include gold jewelry, was the main driver of
May's inflation, rising by 2.03 percent and contributing to 0.11
percent of the total monthly price index increase. Gold jewelry alone
added 0.1 percent to the inflation.
Staple foodstuffs, including rice, were 0.28 percent more expensive
than in the previous month, and made up 0.07 percent of May's
inflation. Prices of processed food as well as the cost of housing,
water and electricity all rose by 0.3 percent.
The rising inflationary trend could hamper Bank Indonesia's plan to
boost economic growth by cutting its key rate, as well as putting its
credibility at stake if it goes back on its policy.
BI cut its benchmark interest rate a quarter point to 12.5 percent last
month -- after keeping it unchanged at 12.75 percent since December
from six increases from 8.5 percent in July last year -- to contain
inflation which had surged to 17 percent from last year's fuel price
hikes.
Indonesia's consumption-driven economy only grew by 4.59 percent in
this year's first quarter, from 6.2 percent during the same time last
year, due to the still high inflation and interest rate environment.
BI's board of governors is scheduled to hold its next monthly policy
meeting next Tuesday.
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