No Change in Indonesian Key Interest Rate

December 3, 2010

The benchmark interest rate of Bank Indonesia has been at 6.5% since a 25-basis point cut in August 2009, which culminated a nine-move, 300 basis point reduction begun in December 2008.  Bank Indonesia has not conformed to Asian norms.  GDP was 5.8% higher than a year earlier last quarter, and CPI inflation accelerated by a half percentage point and to above the 4-6% target range at 6.3% in November from 5.7% in October.  Monetary officials can rationalize that core inflation is just 4.3%, and they are worried about igniting heavier capital inflows that could boost the rupiah and complicate monetary policymaking.

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



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