Indonesia - Indonesia inflation slows to 20-month low in December

Inflation in Indonesia fell in December to its lowest in 20 months, data showed Monday, with analysts saying the central bank may cut its benchmark rate in February or March.

The consumer price index rose 3.79 percent year on year last month, slower than the 4.15 percent in November, according to data from the Central Statistics Agency.

The index rose 3.43 percent in March 2010 compared to the previous year.

Core inflation, which excludes volatile food prices, slowed to 4.34 percent year on year in December, compared with 4.44 percent in November.

For all of 2011, inflation reached 3.79 percent, lower than the central bank's target range of 4 to 6 percent, and far below the previous year's 6.96 percent.

Economists said that Bank Indonesia (BI), the country's central bank, would keep its benchmark rate at 6 percent when its policy board meets on January 12.

"The central bank may refrain from cutting its rate next week partly due to rupiah weakness... (but) the euro-zone crisis will likely continue to deteriorate and BI could cut the rate by 25 basis points in March," Standard Chartered economist Eric Sugandi told Dow Jones Newswires.

"We expect Bank Indonesia to stand pat on Jan. 12, but a tamer inflation outlook this month could prompt the monetary authority to cut rates in February," Bank Central Asia economist David Sumual told Dow Jones.

In October, Bank Indonesia made a major slash to its overnight benchmark rate from 6.5 percent to 6 percent, the second cut in two months after prices dropped 0.12 percent in October from September.

Last month, BI held its benchmark interest rate at 6 percent amid stable inflation and in anticipation of a global economic slowdown.

AFP

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