Indonesia's Central Bank Continues Historic Low Key Interest Rate
Bank Indonesia, the country's central bank, continued its key interest rate at the level of 5.75 percent. The interest rate has been at this historic low level for the 12th month in a row. The current policy rate is "considered consistent with the contained inflationary pressure in accordance with its target range of 4.5 percent ± 1 percent in 2013 and 2014," according to the website of Indonesia's central bank.
Although the bank remains optimistic about Indonesia's macroeconomic growth (with 6.23 percent economic growth in 2012), it said the trade balance is a concern as imports are strong amid the global economic turmoil. To support a stable currency, the bank will support the formation of a reference-to-rupiah exchange rate in the domestic spot market. This reference rate is expected to promote foreign exchange market efficiency and deepening the domestic financial market.
Inflation went up in January 2013 to 1.03 percent (a four-year high on a monthly basis). High rainfall interrupted supply and resulted in increased volatile food inflation. These bad weather conditions remain a risk towards the near future and bring inflationary pressures.
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