Rising Inflationary Pressure Are Unlikely to Alter the Growth Trajectory

In November 2007, the dRi Coincident Economic Index (CEI) - which tracks the current state of the economy – rose to 108.05 from 106.38 in October 2007 (up by 1.57 % month-on-month). The significant increase in the CEI in October means that the CEI is in an uptrend again. This suggests that the Indonesian economy is continuing to expand.

Lower, but to stay above 7 percent

In February 2008, the consumer price index (CPI) rose 0.65% MoM (month-on-month), after increasing by 1.77% MoM in January 2008. As such, the YoY (year-on-year) inflation rate increased slightly from 7.36% in January to 7.40% in February.

Is The Series of Interest Rate Cuts Over ?

The Indonesian central bank stopped lowering interest rates in its monthly meeting in early April for a number of reasons: possible further price increases in the coming months; rising inflationary expectations; the fact that inflation has remained persistently high; and worries that adding a monetary stimulus to the economy would only have a limited impact on growth while, at the same time, triggering higher inflation.

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