The Statistical Bureau will announce Mar10 inflation figure on Thursday (1/4). We think Mar10 consumer prices will decline slightly 0.03% mom, which will bring down the annual headline inflation to 3.55% yoy from 3.80% yoy in Feb10.
The seasonally low food prices during the beginning of rice harvesting season would be the main factor that brings down inflation. The rupiah’s appreciation would also help tame inflation.
Mild inflation in Mar10 also expected to be prevalent until end of 1H10, would encourage Bank Indonesia to keep the interest rate unchanged. Inflationary pressure likely will emerge in 2H10 particularly after the increase in electricity tariff by 15% planned in July and its second-round impact. Thus, we expect the rate would start to increase in the 2H10 gradually to reach 7.25% until YE10.
The statistics agency will announce Feb10 trade figure as well on the same day. We expect export growth to have slowed to 57% yoy from 59% yoy in Jan10, while imports growth could likely increase gradually to 57.6% yoy from 44.6% yoy in Jan10 on robust domestic demand. Trade balance may narrow to US$1.8bn in Feb10 from US$2.0bn a month earlier.
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