Indonesian BI Interest Rate Left Unchanged at 7.5%

March 13, 2014

A statement released after the Bank Indonesia monthly Board meeting cites positive results — falling inflation, more balanced growth, a narrower current account deficit, and rupiah appreciation that has reduced last year’s steep fall in the exchange rate’s value — from a string of interest rate hikes but promises continuing monetary policy vigilance going forward.  Hence, the implicit policy guidance going forward is biased toward further restraint.  CPI inflation fell by a half-percentage point last month but, at 7.75%, remained will above the 3.5-5.5% target range.  Core inflation, however, was within range at 4.6%. 

The BI reference rate had been increased from a trough of 5.75% by 25 basis points in June 2013, 50 bps each in July and August, and 25 bps in both September and November, which was its most recent change.  Global growth has been weaker than assumed previously, and domestic demand has also moderated in response to last year’s dose of monetary restraint.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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