Indonesia's central bank maintained its benchmark BI rate at 7.50 percent, as expected, and repeated that this stance is consistent with inflation reaching its target corridor this year and 2015 as well as reducing the current account deficit to a more sustainable level.
Bank Indonesia (BI), which has maintained rates since November 2013, said it remained vigilant of domestic and external risks, including the risk of contagion from the normalization of U.S. monetary policy as well as an adjustment of administered prices, including any changes to subsidized fuel prices.
Indonesia's headline inflation rate rose to a lower-than-expected 4.53 percent in September from 3.99 percent in August while core inflation fell to 4.04 percent from 4.47 percent. BI targets inflation of 4.5 percent, plus/minus one percentage point this year, and 4.0 percent, plus/minus one percentage point, in 2015.
The current account deficit in the second quarter rose to US$ 9.113 billion from $4.151 billion in the first quarter but was down from $ 10.133 billion in the second quarter of 2013.
BI has called on Indonesia's new government to raise fuel prices before March and preferably by the end of this year to ease pressure on the current account.
Earlier this month the central bank forecast that annual economic growth in the third quarter would slow further to 5.02 percent from 5.12 percent in the second quarter as the economic slows in line with the trending global commodity prices.
Bank Indonesia issued the following statement: