Bank Indonesia Fails to Spring Another Surprise Rate Change

March 17, 2015

At an unscheduled meeting in November, Bank Indonesia had made a 25-basis point hike of the BI reference interest rate, bringing to 200 basis points the cumulative tightening cycle begun in June 2012.  Three months later, Bank Indonesia joined a bunch of other Asian central banks that have eased their stance in response to the effect on inflation of plunging world oil prices.  The BI rate, after this month’s policy meeting, will remain at 7.5%, still 1.2 percentage points above CPI inflation and even further beyond the 3-5% inflation target.  With volatile global financial markets and a current account deficit of some 2.5% of GDP, monetary officials have to be careful not to overplay the policy easing card.  In a released statement, officials blamed rupiah depreciation since the prior meeting on general U.S. currency strength against everyone but painted a generally upbeat picture regarding growth prospects and the outlook for inflation.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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