Bank Indonesia Leaves Reference Interest Rate Steady at 5.75%

September 13, 2012

The last three interest rate changes, all cuts totaling 100 basis points, were administered in October 2011, November 2011 and February of this year.  The current level of 5.75% is below the Great Recession trough of 6.50% and represents a record low.  A statement from the central bank’s Board of Governors projects ample growth consistent with the supply-side potential and benign underlying inflation despite higher seasonal prices for some food commodities.  A downsized current account deficit is noted along with caution that that situation need to be watched carefully.  The rupiah has lost more ground but at a lessening pace.  Monetary officials do not seem in a hurry to raise the reference rate soon, but last month’s upward bump in its deposit rate to 4.0% suggests that neither is a further cut of the reference rate in the cards.  The next Board meeting is scheduled for October 11.

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



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