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Inflation remains high in Indonesia despite forecast easing

[JAKARTA] Inflation remained unchanged yet high in Indonesia in July despite predictions of easing, as consumers stocked up on food and transport tickets ahead of the Muslim holiday of Eid, government data showed Monday.

The consumer price index rose 7.26 per cent year-on-year, the same increase as the previous month, according to the official statistics agency. Inflation in May was 7.15 per cent.

Bank Indonesia, the country's central bank, had expected inflation to ease to 7.13 per cent in July as people pared back their spending after Eid, the end of the holy fasting month of Ramadan, which fell mid-month.

"Inflation was high because of increased spending on foodstuffs and transport for the fasting month and Eid," Suryamin, the agency chief who like many Indonesians goes by one name, told reporters.

Prices on a month-on-month basis rose 0.93 per cent, compared to 0.54 per cent in June.

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.

Spending on transport also spikes, with tens of millions of Indonesians taking cars, buses, planes and trains back to their hometowns for the Eid holiday.

Prices in Java - home to more than half of Indonesia's 250 million people - were relatively restrained in July compared to outside the island, where prices were less stable, Suryamin added.

The high inflation presents a dilemma for the 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.