Bank Indonesia Kept Benchmark Interest Rate at 6.5%

June 3, 2010

It came as no surprise that Indonesia’s key interest rate was held steady.  It’s been at 6.5% since August 2009 after nine consecutive monthly reductions totaling 300 basis points.  A statement from Bank Indonesia dismisses the rise of CPI inflation to 4.2% in May from 3.9% in April as being cause by volatile factors and asserts that core inflation has been trending downward since early 2009.  The statement accordingly concludes “that inflation for the years of 2010 and 2011 will remain within the targeting range, set at 5%±1%.”  Indonesian GDP was 5.7% greater than a year earlier in the first quarter, but joblessness remains above 7%.  The rupiah has risen about 10% against the dollar over the past 12 months.  Indonesia runs a current account surplus, and its budget deficit is comparatively contained.  The banking system is pretty secure and should be able to handle any ripples from Europe’s crisis.

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



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