BI likely to maintain 7.5% rate: Experts

JAKARTA. Bank Indonesia (BI) is set to announce the results of its board of governors’ meeting (RDG) for the first quarter of 2014 on Thursday, including whether the bank would increase or decrease its benchmark interest rate.

Given the fact that Indonesia's economic growth fell to 5.21 percent in the first quarter of the year, compared to 5.7 percent in the same period last year, University of Indonesia economic expert Lana Soelistianingsih said that, ideally, the BI rate should be decreased.

However, she added that the economic slowdown would be temporary.

"There are some factors that have slowed down our economic growth to 5.21 percent, which was beyond our expectations. But this is only temporary, as we are going to see improvement in the second quarter due to the fasting month and Idul Fitri," Lana said in Jakarta on Thursday, as quoted by kontan.co.id.

She said that the benchmark interest rate would stay at a level of 7.5 percent, due to a recovery in Indonesia's fundamental macroeconomics that is predicted to continue.

A lower inflation rate, surplus in the country's trade balance in February and March, as well as a good position in Indonesia's foreign exchange reserves at the end of April could be enough to allow BI to maintain its rate.

"Thus, [the benchmark interest] rate should stay at 7.5 percent," Lana said.

Bank Mandiri economist Destry Damayanti echoed Lana’s statements.

Destry said that the benchmark interest rate should stay at the current level because Indonesia is still facing unpredictable economic conditions due to a range of global and domestic factors.

She added that political factors ahead of the presidential election, as well as development in the country's import and export sectors, which have yet to improve, should be considered by BI as reasons to not decrease the rate. (nfo)