Friday, November 11, 2011

Bank Indonesia Drops Rate 50bps to 6.00%

Indonesia's central bank, Bank Indonesia, dropped the BI reference rate 50 basis points to 6.00% from 6.50%.  Bank Indonesia Governor, Darmin Nasution, said: "The decision to decrease BI Rate has been taken in line with the decreasing trend in inflation pressures and also as Bank Indonesia efforts to narrow the interest rate term structure. This decision is also intended to reduce the impacts of worsening global economic prospect on Indonesian economy. Production and consumption indicators in developed countries continue to show a slowing down while global financial markets remain volatile albeit there was a rebound."

At its October meeting, the Bank also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50%.  Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 4.61% in September, compared o 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 inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Nasution said the Bank expects "inflation next year will be below 5%".  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 this year.  

The Indonesian Rupiah (IDR) is about flat against the US dollar so far this year, and the USDIDR exchange rate last traded around 8,967.

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