Indonesia Advisory

Inflation rate July 2008 as announced by Central Statistical Bereau reached 1.37 percent (month-on-month) or at 11.90 percent (year-on-year), bringing up the year-to-date inflation up to 8.85 percent.

Despite the facts of seasonality reason of school / education needs in this month, the fuel prise rise still give impact in July although some analyst argue and was sure that the impact should not gone this far to July08. But bringing the fact of the transportation cost rise in July, there should not be any doubt that the impact reached July08.

Given the fact that the food and comodity price rise for the last three months that clearly relates to the transportation cost as part of the fuel price rise in May08.

Foods contribute the major component of 1.85% to the inflation rate, housing 1.8% and education cost 1.74%. Fuel price rise suspected would still pressurise the inflation further, plus the Gas price rise increase incurred in July that also contribute 1.8% of July inflation.

The next seasonal factors would be in October (Hari Raya) and December (Christmas), so the reasonable inflation rate is to finish at 12%-13% for 2008. Government must seeks ways to minimize the impact fast to lower the above estimation.