Indonesian inflation accelerates on higher food prices

JAKARTA, Indonesia – Indonesia’s inflation accelerated in May to its highest level in 5 months due to increased food prices, data showed Monday, June 1, as people stocked up before the Islamic holy month of Ramadan.

The consumer price index rose 7.15% year-on-year, according to the official statistics agency, faster than expected and up from a 6.79% increase in April. It was the highest level since 8.36% in December.

Inflation in Southeast Asia’s biggest economy has been edging up in recent months due mainly to higher fuel costs, after the government at the start of the year almost totally abolished huge subsidies and let petrol prices float with the market.

In May, however, the main driver was the higher cost of staples such as chicken and chilli as people stocked up ahead of the fasting month of Ramadan, which starts in mid-June.

Food prices typically rise before Ramadan as people in the world’s most populous Muslim-majority country buy more food to give away to the less fortunate during Islam’s holiest month, and for elaborate fast-breaking meals.

Higher electricity prices also caused inflation to accelerate, said statistics agency chief Suryamin, who like many Indonesians goes by one name.

The accelerating inflation presents a dilemma for Bank Indonesia, the central bank. Some economists are calling for policymakers to cut the main rate from 7.50% to boost slowing growth, but rising inflation limits their room for maneuver. – Rappler.com