Bank Indonesia Keeps the BI Interest Rate at 7.5%

September 17, 2015

Indonesia has been battling comparatively high CPI inflation for some time.  In 2013 a string of BI rate hikes raised such by 175 basis points between June and November, and another 25-basis point increase one year later brought the benchmark up to 7.75%.  Indonesia also has experienced a slowdown in growth, which dropped below the 5% threshold, and so the November 2014 tightening was reversed just three months later, restoring the level to 7.5% where it has remained to now.  Alas, CPI inflation is still very elevated at 7.2%, fed by the rupiah’s decline to a 17-month low.  Indonesia’s chronic current account deficit isn’t being helped by lessening Chinese demand.  Monetary officials are forced to balance conflicting objectives and are achieving none of them as well as they would like.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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