DEFLATION INDICATES IMPROVING ECONOMY: BI

Jakarta, Feb 3 (ANTARA) - Bank Indonesia (BI) Governor Boediono said here on Tuesday that the 0.07 percent deflation in January 2009 indicated favorable developments in the national economy.
He said the deflation had taken place due to the decline in commodity prices in the country. " I think the deflation was fueled by the drop in the prices of various commodities, particularly their domestic prices," he said.
But he was not yet sure whether the deflation would lead the central bank to lower its benchmark interest rate which at present was set at 8.75 percent.
Boediono said that his side was still collecting information from various sides such as the financial and the real sectors, as well as the market players.
"We are still gathering reports from various sides such as the financial and real sectors, as well as from the market. We are still discussing it all," the central bank governor said.
Last month, BI cut its benchmark rate by 50 basis points from 9.25 percent to 8.75 percent. At that moment, BI saw a good inflation development.
In December 2008, according to the Central Board of Statistics (BPS), a 0.04 percent deflation also took place, mainly because of cuts in the prices of subsidized fuel oils.
The BPS said on Monday it recorded a deflation of 0,07 percent in January 2009 with the year- on-year (YoY) inflation of 9,17 percent, deputy chairman of BPS, Ali Rosidi, said here Monday.
"We have a 0,07 percent deflation rate in January 2009 with Consumer Price Index (IHK) of 113,78," Ali said.
He explained that among 66 cities across Indonesia, 33 cities had a deflation while the other 34 inflation.
The highest deflation happened in Manado city with 1,3 percent while the lowest in Medan with 0,01 percent. Meanwhile, Manokwari was recorded as the highest city to have an inflation of 3,84 percent and the lowest was Batam city with 0,01 percent.***2***