Inflation picks up in Indonesia during Muslim holy month

[JAKARTA] Inflation rose in Indonesia in June as tens of millions of Muslims observing the Islamic holy month spent extra cash on food, government data showed Wednesday.

The consumer price index rose 7.26 per cent year-on-year, the government's Statistics Agency said. Inflation in May was 7.15 per cent.

"The cause of the inflation is basic food commodities, as demand is high during the fasting month and ahead of the Eid al-Fitr," Suryamin, the agency chief who like many Indonesians goes by one name, told reporters.

Food prices typically rise during Ramadan in Indonesia, the world's most populous Muslim-majority country, as people stockpile food both for the less fortunate and to break their daily fast with lavish meals.

Inflation is expected to pick up further next month as the country of 250 million celebrates Eid al-Fitr, the end of the holy month, which falls in mid July.

Despite inflation being higher than the previous month, the June figure was lower than forecast by economists.

Inflation in Southeast Asia's biggest economy has been edging up in recent months due mainly to higher fuel costs.

President Joko Widodo, elected in October, virtually abolished huge subsidies at the start of the year and allowed petrol prices to float on the global market.

The rise in inflation presents a dilemma for Bank Indonesia, the country's central bank. Some economists are urging policymakers to cut the main rate from 7.50 per cent to arrest a slowdown in growth, but higher inflation restricts their room to move.

AFP