No Further Monetary Tightening This Month in Indonesia

December 11, 2014

The BI interest rate had been raised by 25 basis points at the prior month’s meeting of Bank Indonesia’s Board of Governors.  That tightening was the first in a year and left the BI level, 7.75%, at its highest since March 2009.  Officials believe that November’s action provides sufficient restraint for now and explains its fine policy balancing act in the latest statement in the following manner:  “A relatively tight monetary policy stance is maintained to control inflation and manage the current account deficit, while accommodative macroprudential policy is instituted in order to avoid the tight monetary policy stance triggering financial system instability.”  Consumer prices rose 6.23% in the year to November and is targeted at 3-5% in 2015.  Indonesian growth, current account deficit, and currency have been falling.  A recent rise in inflation was caused by government-induced higher fuel costs and is considered temporary by officials, who project in-target inflation by the end of next year.

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



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