, Indonesia

Indonesia's inflation to hit 8.2%

On the back of rising fuel prices.

According to Barclays, Indonesia’s inflation is pegged to hit 8.2% by year-end on the planned fuel price hikes.

Here's more:

Indonesia's growth-inflation trade-off looks set to worsen over the coming year as growth slows on the back of primarily weaker investment, some moderation in consumption and lacklustre exports. Our economists cut their growth forecasts by 50bp to 5.8% for 2013 and by 60bp to 5.8% for 2014. 

The team believes BI needs to tighten preemptively to ensure that inflation expectations do not become unhinged or the ultimate growth sacrifice would likely be larger. The recent interest rate hikes are steps in the right direction. However, our economists believe more is needed on interest rate hikes, fuel price reform and increased FX flexibility to take away the latent overhang risk of a sharp move higher in USD/IDR. 

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