The country's consumer price index (CPI) rose 8.7 per cent in October from September and was up 17.9 per cent year-on-year, the Central Bureau of Statistics said. Inflation in the 10 months to October stood at 15.7 per cent.

The increases were far above market and central bank expectations, with Bank Indonesia forecasting a month-on-month rise of 5 per cent and a year-end forecast of just 15 per cent.

The government raised fuel prices on October 1 by an average of 126 percent to relieve some of the pressure caused by crippling state fuel subsidies, after global oil prices struck historic highs.

Central Bureau of Statistics head Choiril Maksum told a news briefing that all CPI components jumped in October, with transportation and communication prices soaring 28.6 per cent month-on-month.

Investors reacted skittishly, with the stock market falling 8.123 points or 0.76 per cent during the morning session to 1,058.101, off a high of 1,077.110.

Bank Indonesia separately said it saw third quarter economic growth in Southeast Asia's largest economy as growing by 5.2 to 5.7 per cent year-on-year, as it warned growth may slow further with full year growth forecast at 5.5 to 6.0 per cent.

Growth was 5.54 per cent in the second quarter and 6.19 per cent in the first.

The government's official GDP growth forecast for 2005 is 6.0 per cent.

"The declining trend can be seen from some leading indicators such as business sentiment and consumer confidence," the bank said.