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Indonesia's inflation slows in August, but higher fuel prices weigh

by Stefanno Sulaiman and Gayatri Suroyo

JAKARTA (Reuters) – Indonesia’s inflation rate fell more than expected in August, official data showed on Thursday, but economists Inflation will pick up, and further rate hikes are likely in anticipation of higher fuel prices.

President Joko Widodo has been considering raising the price of fuel subsidies to curb ballooning energy subsidies amid high global oil prices and a weakening rupiah.

Inflation in Indonesia fell from 4.

to 4. in August due to some food prices falling % % A month ago, Statistics Indonesia data showed. A Reuters poll had expected a rate of 4.90% in August.

but excluding government-controlled prices and volatile food prices, annual core inflation accelerated to 3. 22%, from 2.60% in July, The highest value since November 2019.

The August rate was roughly in line with the 3% forecast in the poll.

Bank Indonesia (BI) targets 2022 and 2023 inflation between 2% and 4%, the The range’s governor, Perry Warjiyo, said it could exceed this year and next.

BI raised its benchmark policy rate by last month since 2018, a move some economists believe was taken in anticipation of higher fuel prices.

The head of Statistics Indonesia, Margo Yuwono, said the increase in fuel prices could significantly increase price pressure as it also affects the prices of other goods and services.

Bank Mandiri’s Faisal Rachman says inflation could rise to 6% this year assuming subsidised gasoline prices rise 30 %, while the forecast is 4.60% No price increase.

“We see that BI still has room to move (base rate) up to

bps in the rest of 2022,” he said Say.

Bank Danamon economist Ir Man Faiz said producers are also under pressure to raise prices at the consumer level due to rising costs. He expects BI to raise rates by a total of 75 basis points for the remainder of 90.

BI’s next policy meeting will be in September 21 and 22.

The authorities did not give a time frame for the increase in fuel prices. The president told the media on Thursday that the government was still carefully calculating the impact of any price increases.

Lawmakers told Reuters last week that the government is considering 30 percent to 40% Subsidized fuel prices rise.



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