No Change in the BI Central Bank Interest Rate

August 14, 2014

Indonesia’s key central bank interest rate will stay at 7.5%, its level since a 25-basis point hike last October that culminated 175 basis points of tightening compressed into a four-month period, which was orchestrated to reduce inflation, support the rupiah and diminish Indonesia’s large current account deficit that’s running at between 3.0 and 3.5% of GDP.  A statement released after this month’s meeting by the central bank Board observes, “there remain a number of external and domestic risk factors that demand vigilance due to their potential to undermine achievement of the inflation target and delay improvements in the current account. To this end, Bank Indonesia will continue to strengthen its monetary and macroprudential policy mix along with policies to bolster the structure of the domestic economy and manage external debt, in particular corporate external debt.”  The statement notes slower growth recently due to diminished commodity exports and that inflation “continued to follow a downward trend, thereby supporting achievement of the inflation target in 2014, namely 4.5±1%.” 

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

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