Indonesian inflation nears 12 percent in August: officials

JAKARTA, September 1, 2008 (AFP) – Indonesia’s annual inflation rate rose to 11.85 percent in August after month-on-month growth of 0.51 percent, Central Statistics Agency chief Rusman Heriawan said Monday.

Annual price growth was less than the expected 12 percent, according to economists polled by Dow Jones Newswires.

While inflation last month was slower than that in July, the central Bank Indonesia (BI) is still likely to hike its benchmark interest rate Thursday in an effort to cool price pressures, analysts said.

“We think BI will raise the BI rate by 25 basis points this month (to 9.25 percent), followed by another 25 basis points hike in October. By raising the BI rate moderately, BI can help check inflationary pressures from the demand side,” HSBC economist Eric Sugandi said.

Inflation in August was largely driven by higher education costs with the start of the new school year, as well as pricier food ahead of the Muslim holy month of Ramadan which started Monday, officials said.

Processed food costs were up 0.59 percent and raw food prices climbed 0.94 percent.

Telecommunications and transport prices fell 0.61 percent as lower world oil prices eased local fuel prices,