Bank Indonesia: No Interest Rate Change Now
June 9, 2011
Indonesia’s reference rate will stay at 6.75% for at least another month. Today’s was the fourth no-change decision in a row. Bank Indonesia has implemented just one rate hike thus far, which it made in February. 300 basis points of easing were implemented between October 2008 and August 2009 followed by 17 sequential no-change decisions through January 2011.
Relative to other Asian central banks, Bank Indonesia is taking its time to lift rates. CPI inflation has declined from 6.8% in February to 6.0% at present. However, today’s central bank statement concedes that core inflation is rising due to the increase in global commodity prices, accelerating domestic demand, and relatively high expected inflation. GDP will probably expand 6-6.5% this year and next, and the rupiah is rising more slowly. The statement implies more rate hikes in the future but does not indicate when such will occur:
Going forward, Bank Indonesia is continuously vigilant to these risks on accelerating core inflation pressures, as well as inflation pressures that may rise from Government policy relating to fuel and electricity subsidies.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia
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