Bank Indonesia

January 10, 2013

Three central bank interest rate reductions between October 2011 and February 2012 lopped 100 basis points off Indonesia’s benchmark to 5.75%, but it will continue to hold at that level for at least another month and most likely longer.  Prior to December 2007, the level had crested at 9.5%.  The only increase since then was a 25-bp move in February 2011.

A statement accompanying today’s affirmation of the 5.75% level affirmed such would be consistent with the 3.5-5.5% medium target inflation range, said GDP grew about 6.3% last year, and was upbeat about growth strengthening slightly further in 2013 and 2014.  A key focus remains the current account deficit.  A rupiah depreciation of about 6% was allowed in 2012, but the exchanged seemed to stabilize last quarter.  Inflation is currently at 4.3%.  Some private analysts worry that such could accelerate, leaving the central bank no choice but to raise its interest rate before the end of this new year.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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