JAKARTA (Reuters) - Indonesia’s central bank said monthly inflation in September would ease significantly, helped by subdued domestic demand and following a spike after an average 33 percent increase in fuel prices at the end of June.
Consumer price inflation eased to 1.12 percent in August month-on-month, compared with 3.29 percent the previous month. In an interview with Reuters, Deputy Governor of Bank Indonesia Perry Warjiyo acknowledged that annual inflation remains high. It surged to 8.79 percent in August from July’s 8.61 percent.
“We have seen deflation in the first week (of September) ... This month inflation will be very, very low,” pointing to slowing domestic demand as a factor as well as measures to deal with food prices.
He said he expected the current account deficit, which hit 4.4 percent of GDP in the second quarter, would trend down in the third quarter. Concern over the current account has been a major factor pressing down the rupiah in recent weeks.
Perry was speaking ahead of the central bank’s monthly interest rate meeting where it is expected to keep rates unchanged after a 50 basis point increase in both its main interest rates at an extra meeting on August 29. Perry said the situation in the markets is better than at that time.
Reporting by Rieka Rahadiana, Jonathan Thatcher and Jason Szep; Editing by Jacqueline Wong