Wednesday July 1, 08:13 AM
INSTANT VIEW 2-Indonesia June inflation at 3.65 pct y/y
JAKARTA, July 1 (Reuters) - Indonesia's annual inflation fell by more-than-expected to 3.65 percent in June, marking a nine-year low and increasing the prospect of an interest rate cut this week.
KEY POINTS:
- June CPI up 3.65 pct on year earlier, less than expected.
- A Reuters poll forecast June CPI up 3.8 percent on year
- Annual inflation at lowest since June 2000 and after 6.04 percent in May, 2009.
- June CPI up 0.11 percent on month earlier, forecast 0.20 percent
- Lower inflation gives c.bank room to cut rates - analysts
- C.bank seen cutting rates 25 bps to 6.75 pct on Friday.
COMMENTARY:
- ANDRY ASMORO, ECONOMIST, BAHANA SECURITIES, JAKARTA
'I think Bank Indonesia will cut its rate by 25 basis points (this week) to signal that the trend for rates is still downward as it seeks to stimulate the economy and despite scepticism over banks not following through by cutting bank lending rates.'
'If Bank Indonesia kept rates unchanged, commercial banks would be encouraged not to cut their rates further.'
'The market has priced in a 25 basis-points-cut at this moment...The rupiah rate should not be affected because the recent gain in the rupiah was due to offshore capital and it is still flowing in.'
- ERIC ALEXANDER SUGANDI, ECONOMIST, STANDARD CHARTERED BANK, JAKARTA
'Year-on-year inflation will remain low throughout the year due to a high base effect. But month-on-month inflation will start to pick up with the new school term in July, high commodities prices, and the Ramadan fasting month in August. We need to watch out for month on month.'
'The market has already priced in low inflation and another BI rate cut this week. So its impact on the rupiah and the bond market will be limited.'
MARKET REACTION:
- The rupiah was little changed at 10,200 per dollar at 0633 GMT after the data announcement.
- Bond prices were also steady, while the Indonesia Composite Index remained up about 1 percent at 0633 GMT after the announcement.
LINKS:
- For more data, Indonesia's statistics bureau Web site is: http://www.bps.go.id.
- For a breakdown of consumer price inflation, please click on
- Stories on Indonesia's economy...........
- Stories on Indonesia's central bank......
BACKGROUND:
- Analysts in a Reuters poll forecast the central bank would slash its overnight policy rate by 25 basis points to a record low of 6.75 percent on Friday.
- Bank Indonesia Deputy Governor Hartadi Sarwono said on Monday there was room to cut rates again.
- The central bank has forecast growth in Southeast Asia's biggest economy will slow sharply this year to 3-4 percent from 6.1 percent last year as it feels the effects of the global economic slowdown.
(Reporting by Adriana Nina Kusuma, Andreas Ismar, Dicky Kristanto; Editing by Ed Davies)
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