Bank Indonesia: No Change This Time

August 9, 2012

Indonesia’s central bank benchmark interest rate was left at 5.75%, the level since a 25-basis point cut back in February.  There had also been reductions of 25 bps in October 2011 and 50 bps in November 2011.  A statement from officials reiterates points made in July, namely that the present stance is consistent with the 3.5-5.5% CPI inflation target and that GDP is growing decently, all things considered.  Concern was express again about the size and widening of the current account deficit, which officials believe will reverse later this year.  From December 2008 to August 2009, the key interest rate was reduced by 300 bps to 6.5%.  No change ensued subsequently until a 25-bp rate hike in February 2011.  At 5.75% now, the rate is 75 basis points lower than its bottom in the global recession of 2008-9.  No concrete hints are given in the latest statement about when the key rate might change again or in what direction such is apt to move.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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