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Jakarta.  Driven by higher food prices, a new school year and a hike in electricity rates, inflation is expected to have accelerated in July, but analysts say the central bank is still unlikely to increase its key interest rate this month.

Analysts from PT Bank Danamon, OCBC Bank, Standard Chartered, PT Bank Internasional Indonesia and UBS Investment Research estimated July’s year-on-year inflation at between 5 percent and 5.89 percent.

Annual inflation accelerated to 5.05 percent in June, the highest since May last year, as a prolonged rainy season pushed up food prices. Inflation in May reached 4.16 percent.

The Central Statistics Agency (BPS) is due to release July inflation figures and June trade numbers today.

Helmi Arman, an economist at Danamon, saw July inflation rising to 5.59 percent. “The price of rice, chilis and onions surged last month and probably have not yet come down,” he said.

“Apart from that, there will also be seasonal increases in tuition fees in the run-up to the new school year.”

The July 1 electricity hike, although the impact has yet to be fully realized, would also fuel higher inflation, he added.

Gundy Cahyadi, an economist with OCBC, saw July inflation reaching 5.5 percent. He said volatile food prices would continue to pressure inflation.

“This is in line with the anticipated increase in prices across the board ahead of Ramadan and the Idul Fitri festivities that follow,” he said. The Islamic fasting month is to begin on Aug. 11.

And yet all five analysts agreed higher inflation would not yet drive the central bank to hike its benchmark rate from a record low of 6.5 percent, which was set in August 2009 to stimulate the economy amid the global economic downturn.

Bank Indonesia has insisted inflation is under control. Its new governor, Darmin Nasution, on Friday said he saw full-year inflation at 6 percent, at the upper end of its 2010 target, but reiterated there was no need to raise rates this year.

Edward Teather, an economist at UBS, said that although the central bank was not behind the curve in following several other nations in hiking rates as the global economy recovers, an increase in the fourth quarter was likely necessary.

“Inflation has been rising, but there is still room for debate whether it will surpass BI’s target on a sustained basis,” he said.

“I believe inflation will lead to a BI policy rate hike this year, but the July inflation data in isolation is not likely to justify a policy adjustment in August.”

UBS has forecast inflation of 6.4 percent by December, with the key interest rate rising to 7.5 percent by end of the year.

“But BI would probably gain some credibility with regards to its inflation target if it began to adjust policy rates in the next two to three months,” Teather said.