No Change Made to Bank Indonesia’s 5.75% Reference Policy Interest Rate

June 12, 2012

Officials at Bank Indonesia as expected did not change their monetary policy stance.  The most recent monthly change came in February when a 25-basis point reduction was decided.  The rate was cut also by 25 basis points last October and 50 bps in November.  Such had been cut 300 bps during the Great Recession and increased just once subsequently, a 25-bp hike in February 2011 to 6.25%. 

A statement explaining today’s decision notes growth headwinds due to external risks: “The prospect of global economy is still confronted with rising uncertainty and worsening crisis in Euro area, vulnerable US economic condition, and lower economic growth in China and India driven by crisis in Euro area.”  In-target (3.5-5.5%) inflation is forecast despite some rupiah depreciation related to external factors.  Policy remains sensitive to any sign of slippage in expected inflation.  That hasn’t happened, and indeed core inflation has “continued its downward trend.”

The reference rate of 5.75% is at a record low.

Copyright 2012, Larry Greenberg.  All rights reserved. No secondary distribution without express permission.

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