Indonesia: Bank Indonesia holds policy rate at 7.50%
December 12, 2013
At its 12 December monetary policy meeting, the Central Bank decided to hold the BI policy rate at 7.50%. The move was expected by the market. The BI policy rate currently stands at its highest level since April 2009 and has been increased by a cumulative 175 basis points over the course of the past seven months. The Bank also kept the deposit facility rate and the lending facility rate unchanged at 5.75% and 7.25% respectively.
Bank Indonesia stated that its policy decision is, "consistent with ongoing efforts to bring inflation back towards the target corridor of 4.5±1% in 2014 as well as to reduce the current account deficit to a more sustainable and sound level." The Bank noted that inflation was moderate and followed an overall downward trend in November. Moreover, gains in the balance of trade and ongoing foreign capital inflows are helping narrow the current account deficit. The Bank also recognized that the rupiah faced pressures again in November after signs of stabilization in prior months.
FocusEconomics Consensus Forecast panelists expect the BI rate to average 6.59% by the end of 2013. For 2014, panelists expect the BI rate to remain virtually unchanged, ending the year at 6.50%.
Author: Carl Kelly, Economist