Indonesia March inflation rises 5.9%; to add to pressure on weak rupiah | Insider sector data 

(Insider Stories)-An increase in Indonesia’s inflation rate in March to 5.9%, well above the official inflation target, will add to pressure on the rupiah alongside a widening trade deficit.

The rupiah fell against the U.S. dollar for a seventh consecutive quarter in the January-March period, marking the longest losing streak since the Asian crisis in the late 1990s.

From a month earlier, prices rose 0.63%, compared with February’s 0.75%.

“The 0.63% month-on-month rise is among the highest increases in the past five years,” according to statistics agency chairman Suryamin. “The government needs to manage the condition so volatile food inflation won’t continue.”

Stripping out prices of goods that are often volatile and prices that are administrated by the government, core inflation eased to 4.21% from 4.29% in February, providing elbow room for Bank Indonesia to maintain its overnight benchmark policy rate at record low of 5.75% this month.

The surprisingly elevated headline inflation print in March, however, may prompt the monetary authority to make some sort of tightening by raising the deposit facility, or FASBI rate, by 25 basis points to 4.25% to help absorb excess liquidity.

The statistics agency earlier in the day also released February trade data which showed a fifth consecutive month of trade deficit on sluggish commodity prices it exported while robust domestic demand pushing up imports.

The agency said Indonesia’s exports were valued at $14.99 billion in February, a 4.5% fall from a year earlier, while imports rose 3% to $15.32 billion.

That resulted in a $328 million of trade deficit in February, wider than a revised $74.7 million deficit in January. Such persistent trade deficits in turn translate to a current account deficit, creating selling pressure on the rupiah.