Urip Hudiono, The Jakarta Post, Jakarta
Inflation continued to ease in April, clocking in at an on-year rate of 15.4 percent, compared with March's 15.74 percent, as lower prices for staple foodstuffs balanced out rises in household utility prices.
Indonesia's consumer price index increased slightly by 0.05 percent during the month as compared to a 0.03 percent monthly increase in March, the Central Statistics Agency (BPS) reported Monday. This was the index's lowest level for April in the past three years.
Consumers in 23 cities, out of the total of 45 major cities whose commodity price movements the BPS monitors for its monthly index, even saw deflation, paying less for the goods and services they purchased in April than in the previous month.
Meanwhile, core inflation, which excludes volatile prices like food and regulated prices such as fuel, stood at an on-year rate of 9.43 percent and 0.32 percent month-to-month.
While last month's easing inflation may be positive for Indonesia's consumption-driven economy as it will provide further room for the central bank to lower its key interest rate, the recent surge in global crude prices may make Bank Indonesia (BI) think twice before making such a decision.
Analysts have also said that easing inflation could prove to be ""deceptive"" if it is found to be driven more by weaknesses in people's purchasing power.
The central bank is expected to hold its next monthly policy meeting on May 9. At its last meeting, BI kept its key rate unchanged at 12.75 percent for the fourth straight month since December, citing still unstable oil prices and tight global monetary policy trends.
Indonesia's economic growth slowed to 4.9 percent during 2005's final quarter from 6.2 percent in the first as a double fuel price hike designed to prevent soaring crude prices affecting the country's fiscal stability drove up inflation and interest rates, thereby hurting consumption and investment. Oil prices have lately touched US$75 a barrel, compared with last year's $70 peak.
The rupiah, however, benefited from the higher rates, and has gained some 10 percent this year to breach the Rp 8,800 per U.S. dollar mark recently.
Both the government and the central bank still see inflation as being containable at about 8 percent by the end of this year, but are divided on the 6.2 percent growth target for 2006, having revised it down to between 5.4 and 5.9 percent.
BPS director Choiril Maksum acknowledged that the weakening in the purchasing power of the public had contributed to the slower rate of inflation, but said that the recent declines in food prices played a much bigger part.
""The prices of staple foodstuffs this month, for example, declined quite a lot as supplies are abundant during the present harvest season,"" he said.
In April, staple foodstuffs, including rice, were 0.85 percent cheaper than in the previous month.
Lower staple food prices helped shave 0.21 percentage points from April's monthly inflation, while higher prices for processed food and clothing increased it by 0.08 and 0.04 percent, respectively.
Prices of processed foods, which includes beverages and cigarettes, increased by 0.43 percent last month, while clothing went up by 0.7 percent.
Consumers may expect higher prices for processed foods and clothing again this month, with local producers expecting higher production costs on increased fuel prices.
The cost of housing, and water and electricity rose by 0.42 percent in April, and contributed 0.1 percent to the monthly inflation rate.
