Benchmark Bank Indonesia Interest Rate Kept at 6.5%

December 3, 2009

As was expected, Indonesian monetary officials left their key interest rate at 6.5% where such has been for the past four months.  From a peak of 9.5%, nine consecutive monthly rate cuts were implemented starting exactly a year ago.  Six of the reductions including the first and last ones were by 25 basis points, and the other three in February, March, and April were by 50 basis points each.

A statement was released by officials today touting the resilience of domestic economic growth, remarkably low inflation, and the responsiveness of financial markets to monetary stimulus.  CPI inflation fell unexpectedly further to 2.4% in November from an on-year 2.6% in October, and officials both revised up expected 2009 growth to 4-4.5% and penciled in a growth rate of 5-5.5% for next year.  They expect to attain next year’s inflation target of 5% give or take one percentage point.  It looks like officials are in no rush to begin lifting the key interest rate, which is at a 4-1/2 year low.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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