Thursday, October 11, 2012

Indonesia holds rate, says economy growing, inflation low

    The central bank of Indonesia kept its benchmark BI Rate unchanged at 5.75 percent, as expected, saying inflation was low and under control while the domestic economy continues to grow quite well, though not as fast as earlier expected due to the weaker global growth.
    Bank Indonesia (BI) said the economy was expected to grow an annual rate of 6.3 percent in the third quarter, supported by consumption and domestic demand-oriented investments. But falling exports have affected production and export-oriented invested, it added.
    "Looking ahead, economic growth will still be supported by strong domestic demand and there is potential for improvement in exports though this is still overshadowed by global economic uncertainties," BI said in a statement.
    Bank Indonesia has only changed rates once this year, in February when it cut by 25 basis points.
    The bank expects Indonesia's economy to expand between 6.1-6.5 percent in 2012 and by 6.3-6.7 percent in 2013. In the second quarter, Gross Domestic Product expanded by 6.4 percent from the same quarter last year, up from 6.3 percent in the first quarter.

    BI said global inflation was relatively moderate, which has allowed many countries to ease policy to improve growth. This has also created a positive sentiment in global financial markets and lead to capital flows to emerging countries.
    Inflation in Indonesia is under control, the bank said, noting an annual rate of 4.31 percent in September, down from 4.48 percent in August. The BI targets annual inflation of 4.5 percent, plus/minus 1 percentage point.
    BI said it would continue to strengthen its coordination with the government to manage demand and improve the balance of payments.


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