Bank Indonesia surprises with benchmark rate hike to 6%

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Indonesia’s GDP growth Q3/2009 – Q1/2013

Bank Indonesia, the country’s central bank, said on June 13 in an emailed statement that it has raised the benchmark interest rate by 25 basis points to 6 per cent, a move that surprised investors and analysts.

“The policy was part of Bank Indonesia’s policy mix to response pre-emptively to rising inflation expectations and to maintain macroeconomic stability and financial system stability amid increasing uncertainty in global financial markets,” the statement said.

Analysts argue that the raise is aimed at improving sentiment towards the rupiah. The currency has fallen against the US dollar to its lowest since 2009 as foreign investors pulled money from emerging markets, and as domestic investment decisions are influenced by the prospect of slowing growth. The rupiah stood at 9,884 to the US dollar on June 13.

Bank Indonesia projects inflation of up to 7.8 per cent at the end of 2013 if the government increases fuel prices, above its 3.5 to 5.5 per cent target range.

Indonesia’s economic growth in the second quarter of 2013 is projected to be biased downward to the lower bound of earlier forecast range of 5.9 to 6.1 per cent amid the slowdown in the global economy, the central bank said.

“The continuing crisis in Europe and a slowdown in China potentially led to lower the global economic growth. These conditions restrained the growth of exports and investment, especially non-construction investment. The source of Indonesia economic growth is primarily driven by continuous strong household consumption and investment in construction,” the statement mentioned.

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Reading Time: 1 minute

Indonesia’s GDP growth Q3/2009 – Q1/2013

Bank Indonesia, the country’s central bank, said on June 13 in an emailed statement that it has raised the benchmark interest rate by 25 basis points to 6 per cent, a move that surprised investors and analysts.

Reading Time: 1 minute

indonesia-gdp-growth
Indonesia’s GDP growth Q3/2009 – Q1/2013

Bank Indonesia, the country’s central bank, said on June 13 in an emailed statement that it has raised the benchmark interest rate by 25 basis points to 6 per cent, a move that surprised investors and analysts.

“The policy was part of Bank Indonesia’s policy mix to response pre-emptively to rising inflation expectations and to maintain macroeconomic stability and financial system stability amid increasing uncertainty in global financial markets,” the statement said.

Analysts argue that the raise is aimed at improving sentiment towards the rupiah. The currency has fallen against the US dollar to its lowest since 2009 as foreign investors pulled money from emerging markets, and as domestic investment decisions are influenced by the prospect of slowing growth. The rupiah stood at 9,884 to the US dollar on June 13.

Bank Indonesia projects inflation of up to 7.8 per cent at the end of 2013 if the government increases fuel prices, above its 3.5 to 5.5 per cent target range.

Indonesia’s economic growth in the second quarter of 2013 is projected to be biased downward to the lower bound of earlier forecast range of 5.9 to 6.1 per cent amid the slowdown in the global economy, the central bank said.

“The continuing crisis in Europe and a slowdown in China potentially led to lower the global economic growth. These conditions restrained the growth of exports and investment, especially non-construction investment. The source of Indonesia economic growth is primarily driven by continuous strong household consumption and investment in construction,” the statement mentioned.

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