Bank Indonesia Keeps Interest Rate at 6.00%

Indonesia's central bank, Bank Indonesia, kept the BI reference rate unchanged at 6.00%.  Bank Indonesia Governor, Darmin Nasution, said: "Board of Governors views that current BI rate is still consistent with inflation targets, financial system stability, and remains conducive to propel domestic economic expansion amidst global economic uncertainty. In 2011, Indonesian economy showed strong performance with low inflation, higher economic growth, stable exchange rate, and stable financial system. The achievement was supported by various policies implemented by Bank Indonesia and the government. Going forward, Bank Indonesia will monitor closely the worsening global economic condition. Regarding the policy, Bank Indonesia will continue to strengthen monetary and macro-prudential policy mix, as well as coordination with the government."

Previously the Bank cut the interest rate by 50 basis points at its November meeting, and also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50% at its October meeting.  Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 4.1% in November, down slightly from 4.61% in September, compared o 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Bank Governor Nasution previously said the Bank expects "inflation next year [2012] will be below 5%".  Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter last year.  

The Indonesian Rupiah (IDR) has weakened by about 1% against the US dollar over the past year, and the USDIDR exchange rate last traded around 9,157.

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