Bank Indonesia may keep rate unchanged this year

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Media : The Jakarta Post		Date : Wednesday, March 24, 2010
Page : 14		Tone : Neutral
Position : Top-Center		Section : Business

Indonesia's central bank may keep its benchmark interest rate unchanged this year as inflationary pressure remain benign, Bank Indonesia Deputy Governor Hartadi Sarwono said.

"If the inflation rate hovers around 5 percent to 6 percent, it is not urgent yet to raise the interest rate," Sarwono said in a text message to reporters Monday.

A survey of 16 economists by Bloomberg News predicted the benchmark rate to rise to 7 percent in the third quarter and 7.25 percent in the fourth quarter of this year.

Indonesia, Southeast Asia's larg­est economy, slashed the benchmark rate by 3 percentage points from December 2008 to August last year, keeping it at 6.5 percent in early March, the lowest level since its in­troduction in July 2005.

That compared with other econo­mies in the region such as Australia, China, India and Vietnam, which have tightened monetary policy to fight inflation and avert asset bubbles.

Indonesia's doesn't see a need to review its benchmark interest rate as inflation remains on track, Senior Deputy Governor of Bank Indone­

sia, Darmin Nasution said earlier in the day.

Bank Indonesia expects inflation of between 4 percent and 6 per­cent this year compared with 2.78 percent in 2009, the central bank has said.

Indonesia's consumer price in­dex rose 3.81 percent in February from a year earlier after gain­ing 3.72 percent in January, the central statistics agency said earlier this month.

The central bank kept its bench­mark interest rate unchanged at 6.5 percent on March 4, the lowest level since the measure was intro­duced in July 2005, as it aimed to boost growth in Southeast Asia's largest economy.

Bank Indonesia will focus on guarding against rupiah volatility and doesn't aim for the currency to

trade at any "special level" against the dollar, Darmin said Monday in Jakarta.

The rupiah fell 0.2 percent to Rp 9,123 per dollar as of 4:16 p.m., Mon­day in Jakarta, according to Bloom­berg data. It reached Rp 9,095 on March 17, the strongest level since August 2008.

The currency may strengthen 1.3 percent to Rp 9,000 against the dol­lar by the second quarter, according to Citigroup Inc.

The central bank "is more tolerant of rupiah appreciation than raising interest rates to temper inflation", Citigroup analysts led by Johanna Chua, the Hong Kong-based head of Asian economic research, wrote in a note today. Moody's Investors Service may raise Indonesia's credit rating outlook to positive over the "next few months," Citigroup said.