Indonesia Monetary Policy


Central Bank leaves interest rates unchanged

At its 8 December monetary policy meeting, the Central Bank kept the benchmark interest rate at a record low 6.00%. The decision followed a surprising 50 basis point interest rate cut in the previous month, and was expected by the market. By maintaining interest rates unchanged, monetary authorities took into consideration prevailing uncertainty in the financial markets as well as slowing global demand. That said, Bank Indonesia highlighted the performance of the domestic economy, claiming it is ?supported by well-maintained macroeconomic and financial system stability.? Monetary authorities predict overall economic growth in 2011 to reach 6.5%, although they expect it to decelerate slightly in 2012. Regarding price developments, inflation continued to moderate in November and fell to 4.2% in November, situating it near the lower band of the Central Bank's inflation target of 5.0% 1% for this year. The Bank projects that inflation will also remain within the target in 2012 but remains vigilant on upside risks such as food price inflation (especially rice) and the volatility of the Indonesian rupiah.


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