Indonesian inflation surges 8.61%

Indonesia's annual inflation accelerated 8.61 percent to a four-and-a-half year high in July after the government hiked the price of fuel in June, the official Central Statistics Agency (BPS) said here Thursday. July's inflation was mainly driven by the transportation and food costs as the impact of the hike of subsidized fuel prices by an average of 33 percent on June 22 was fully felt, BPS head Suryamin told a press conference. Annual core inflation, which excludes volatile and administrative price components, rose to 4.4 percent in July from 3.14 percent in the previous month. The inflation rate in July increased 3.29 percent on a month-on- month basis, according to Suryamin. The agency's figure beat the estimation of Bank Indonesia (BI), Indonesia's central bank, who put the July annual inflation at 8. 18 percent on Tuesday. BI has raised its benchmark interest rate by 25 and 50 basis points to 6.50 percent in June and July respectively to tackle accelerating inflation. The central bank expects the rate of inflation to ease to 7.2 percent at the end of this year. Eric Sugandi, an economist with Standard Chartered Indonesia, told Xinhua that the high inflation will hit both Indonesia's household consumption and investment, and BI needs to safeguard the country's economy by further hiking the benchmark rate and the overnight deposit rate. The growth of Southeast Asia's largest economy has eased to 6 percent in the first quarter, the slowest in two years. BI expected the country's economy to expand by 5.8 percent to 6.2 percent in 2013, lower than its earlier forecast of 6.2 to 6.6 percent.