Bank Indonesia Waiting and Seeing

October 11, 2012

Indonesia’s central bank rate, which has been 5.75% since three cuts totaling 100 basis points (25 basis points in October 2011, 50 bps one month later and 25 bps in February of this year), was again left unchanged after officials held their monthly policy meeting.  A statement asserts that “the current policy rate is considered consistent with the inflation forecast, which is expected to remain low and contained within its target range of 4.5%±1% in 2012 and 2013.”  In light of the prognosis of continuing subdued and contained inflation, “Bank Indonesia will continue to focus on policies to maintain external balance while also providing support for domestic economic growth.”  Headline and core CPI (4.3% and 4.1% in September) are below the midpoint.  Officials revised down projected growth but still expect such to surpass 6.0%.

Bank Indonesia was later than most Asian central banks in implementing post-Great Recession tightening and only made a single 25-basis point hike of 25 basis points in February 2011.  The current 5.75% level is below the 6.5% reached during the global downturn.

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

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