Indonesia's inflation at four-year high after fuel hike

JAKARTA (AFP) - Indonesia's inflation hit its highest level in July since early 2009 after a fuel price hike and an increase in the cost of food during Ramadan, official data showed on Thursday.

The sharp rise to 8.61 per cent on-year underscored the myriad risks facing South-east Asia's top economy, which is also battling slowing growth and a trade deficit.

The consumer price index was at its highest level since January 2009 when it hit 9.17 per cent, and rose from 5.90 per cent in June.

It also accelerated to 3.29 per cent from a month earlier, the data from the Central Statistics Agency showed.

Economists had been expecting a sharp increase after the government defied popular anger in June to hike fuel prices, with petrol going up by 44 per cent and diesel by 22 per cent.

As well as increasing the price of fuel for motorists, the hike pushed up the price of food due to the increased cost of moving goods.

"Headline consumer price inflation exceeded all forecasts," said Credit Suisse in a note.

However, the bank added that "today's numbers may well represent the peak in inflation".

Statistics agency official Sasmito Hadi also predicted inflation would likely ease in August.

Shoppers splurging on delicacies during the holy month of Ramadan, which comes to an end on August 8 with the Eid holiday, contributed to strong rises in food prices.

While many fast in daylight hours during Ramadan in Muslim-majority Indonesia, they typically enjoy lavish feasts to break fast and stock up on expensive food for Eid.

The country's trade deficit also widened to US$850 million (S$1,081 million) in June from US$590 million in May as weak global demand weighed on exports, the agency said.

The central bank has hiked the benchmark interest rate at its past two meetings by a total of 75 basis points to 6.50 per cent as it seeks to keep inflation in check.

It is also trying to shore up the rupiah which plummeted after investors pulled money out of Indonesia due to fears the United States might cut back its huge stimulus programme.

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