Indonesia's central bank maintained its benchmark BI rate at 7.50 percent, as expected, saying this policy stance is consistent with its effort to steer inflation toward its target corridor of 4.5 percent, plus/minus one percentage point, in 2014 and the 2015 target corridor of 4.0 percent, plus/minus one percentage point, and its efforts to reduce the current account deficit to a more sustainable level.
Bank Indonesia (BI) has held rates steady since November 2013 after raising them by 175 basis points last year in response to inflationary pressures. Indonesia's inflation rate eased to 6.7 percent in June from 7.32 percent in May, continuing the decline seen since 8.79 percent in August 2013.
BI issued the following statement:
It was decided at the Bank Indonesia Board of Governors’ Meeting, convened on 10th July 2014, to maintain the BI Rate at 7.50%, with the Lending Facility and Deposit Facility rates held respectively at 7.50% and 5.75%. Such policy is consistent with efforts to steer inflation towards the target corridor of 4.5±1% in 2014 and 4.0±1% in 2015, as well as to reduce the current account deficit to a more sustainable level. Bank Indonesia assures that macroeconomic stability will be maintained amidst domestic economic rebalancing. Moving forward, however, there remain a number of external and domestic risks that demand vigilance in order to successfully achieve the inflation target and improve current account performance. To that end, Bank Indonesia will tirelessly strengthen its monetary and macroprudential policy mix, coupled with policy measures to reinforce the structure of the domestic economy and manage external debt, particularly corporate external debt. In addition, Bank Indonesia will also tighten policy coordination with the Government in terms of inflation control and managing the current account deficit in order to shore up the economic rebalancing process, thereby maintaining increasingly sustainable growth momentum looking ahead.
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