Bank Indonesia Cuts Key Rate By Another 25 Basis Points

April 3, 2009

Indonesia’s key central bank rate was reduced 25 basis points. Reductions in each of five consecutive months since December add up to 200 basis points in total.  Today’s move was smaller than the previous three.  Market expectations had been split between 25 basis points and 50 bps, with a slight majority favoring the smaller-sized increment.  Inflation is falling but at 7.9% now exceeds Bank Indonesia’s policy rate.  A statement released by BI officials today projected inflation would fall near to the low end of its 5-7% target range by the end of this year.  Projected growth in 2009 was revised somewhat lower but at 3-4% represents comparative strength by world or even Asian standards.  Typical of other Asian economies, Indonesian exports have dropped very sharply, with on-year decreases of more than 30% in the first two months of this year.  The central bank statement complains that its rate reductions have not been fully passed on to corporate borrowers.

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


Comments are closed.