Asia tries to get a grip on inflation

JAKARTA: Asia grappled with a response to inflation on Tuesday in an era of $120-a-barrel oil and record commodity prices, with Indonesia raising rates and other countries saying that they hoped the problem would soon be under control.

Inflation in the Philippines neared a three-year peak, but the central bank there said it would hold steady for the time being.


A government research organization in South Korea forecast its fastest inflation in seven years in 2008. But the only move that analysts expect from a policy review this week is a rate cut to shore up sagging growth.

In India, where the central bank kept its policy rate steady last week, an official said he expected inflation to moderate within weeks.

It took the news of a planned rise in fuel prices to prompt the Indonesian central bank to make its first rate increase since December 2005.

After April inflation rose to a 19-month high, the Indonesian government said Monday that it planned to raise fuel prices, a highly sensitive issue that has incited protests in Indonesia in the past and contributed to the downfall of the Suharto government in 1998.

“If the average fuel price hike is at around 30 percent this month, then May inflation is likely to spike very high,” said Juniman, an economist at Bank Internasional Indonesia. “The year-on-year figure might rise to double digits.”

Reuters