Asia battling against inflation, as Indonesia’s rate increases.

The central bank of Indonesia has raised the interest rate by 25 basis points today, which has lifted the main rate to 8.25 percent.

The inflation in April was at a 19 month high, and the bank indicated that it would act against as and when necessary.

It is the first rate rise since December 2005, since last December’s change in interest rates which was actually a quarter point cut of the benchmark.

Inflation in Southeast Asia’s biggest economy has soared to nearly 9 per cent and economists had predicted a larger increase to around 8.5 percent as well as indicated that they expected the central bank not to make a move this week.

Yesterday the government planned to raise fuel prices to reduce the spiralling subsidy and the government aims to monitor the situation with inflation.

Miranda Goeltom is currently in charge of the central bank’s day-to-day operations, as the Governor Burhanuddin Abdullah has been detained as a suspect in a graft case.

Meanwhile, the Jakarta Composite Index fell 0.7 percent.

Whilst the rupiah, which has fallen by 1.1 percent in the past six months, has gained 0.2 percent and is currently trading at 9,210 against the dollar in Jakarta.

Story link: Asia battling against inflation, as Indonesia’s rate increases.