No Change in Indonesian Monetary Policy

February 4, 2010

Bank Indonesia’s key interest rate, which has been at 6.5% since a 25-basis point cut in August, was again left unchanged as expected.  A statement on the BI website projects a steadily improving domestic economy and in-target CPI inflation this year, that is between 4% and 6%.  Real GDP rose 4.3% between 3Q08 and 3Q09, and a recent acceleration to a 12-month pace of 3.7% from 2.8% at end-2008 was attributable to higher rice prices.  Indonesia’s banking system is “stable” according to BI officials.  Beginning with a 25-bp rate cut in December 2008 from a peak of 9.5%, the policy interest rate was reduced by 25 bps in January 2009, 50 bps each in February, March and April, and 25 basis points each in May, June, July and August.  The onset of rate increases is generally expected around the middle of this year.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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