Bank Indonesia Retains 5.75% Record Low Reference Interest Rate

February 12, 2013

The benchmark interest rate has been at 5.75% since a reduction of 25 basis points in February 2012, which was the third cut following ones of 25 bps in October 2011 and 50 bps in December 2011.  300 basis points of easing that began in December 2008 ended in August 2009 at 6.5%.  Two years ago in February 2011, officials implemented their only rate hike since October 2008.

A statement from the Board of Governors reiterated the belief that CPI inflation will stay inside its 3.5%-5.5% target corridor this year and next.  It’s currently a tad above the target midpoint, although disruptive weather, rupiah vulnerability and administered price increases pose potential upside risks.  Chances for any further rate cut appear to have diminished greatly.  A smaller current account deficit is a high priority, as such is not yet at a comfortably sustainable level.

The March rate announcement is set for the 7th.

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



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