Thursday, February 9, 2012

Bank Indonesia Drops Rate 25bps to 5.75%

Indonesia's central bank, Bank Indonesia, cut the BI rate by 25 basis points to 5.75% from 6.00% previously.  The Bank said [translated]: "This decision was made as a further step to boost Indonesia's economic growth amidst decreasing performance of the global economy, with the priority remains on achieving inflation target and exchange rate stability. With this BI rate decision, the lower and upper bounds of interest rate corridor of Bank Indonesia's monetary operation becomes 3.75% for overnight deposit facility (deposit facility rate) and 6.75% for overnight lending facility (lending facility rate), respectively."

The Bank held its rate unchanged at its January meeting, and cut the interest rate by 50 basis points at its November 2011 meeting, and also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50% at its October meeting.  Previously the Bank raised the BI rate by 25 basis points to 6.75% in February 2011.  Indonesia reported annual inflation of 3.7% in January, down from 4.1% in November, down slightly from 4.61% in September, compared to 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just below the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter last year. The Indonesian Rupiah (IDR) is flat against the US dollar over the past year, and the USDIDR exchange rate last traded around 8,945.


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