Bank Indonesia

July 10, 2014

A more restrictive monetary policy in Indonesia addresses three problems in particular: above-target inflation of 6.7% (the target is 3.5-4.5%), a current account deficit roughly equal to 3.5% of GDP, and a vulnerable rupiah, whose deceleration picked up pace last month.  From a low of 5.75%, the BI central bank interest rate was lifted by 175 basis points between June 2013 and November 2013 to 7.5%.  Macro-prudential policies are being pursued as well.  For an eighth straight monthly meeting, however, the BI rate was left unchanged.  Any change in the near term seems more likely to be upward than downward.

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



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