Selasa, 26 Juli 2011
Economy Inflation forecast lowered to 6.0% for the year - DBS
We have revised our inflation forecast for 2011 down to 6.0% from 6.7% previously. Indonesia is still enjoying its ‘sweet spot’ of declining headline inflation and robust economic growth. Indeed, since peaking in January this year at 7.0%, inflation has been trending lower and is hovering at 5.5% in June. Despite tame price pressures at the moment, the early signs of demand-pull inflation are already there as seen by the strong loan growth and money supply growth numbers. Moreover, the output gap has also turned positive for two quarters. We suspect that core inflation will breach 5.0% towards the end of the year, necessitating further monetary tightening. Recognizing that the sweet spot may last several months and there is no real urgency for the central bank to act, we have also revised our view for policy rate hikes. We now see two 25bps rate hikes for the rest of the year, taking the policy rate to 7.25%.
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