Central Bank keeps rates unchanged at 5.75%

JAKARTA. Central Bank of Indonesia (Bank Indonesia/BI) has kept interest rates unchanged for fifteen months in a row. In the Board of Governors' Meeting convened on May 14th, 2013, Bank Indonesia decided to hold the BI rate steady at 5.75%.

Rates have remained at the same level since BI cut rates from 6% in February last year.

BI Executive Director Difi A. Johansyah said the current policy rate is considered consistent with inflation target range of 4.5%±1% in 2013 and 2014.

Although Consumer Price Index (CPI) in April 2013 recorded a deflation, Bank Indonesia will closely monitor the risk of inflationary pressures. "It's emanating from rising inflation expectations in view of the possibility of a Government policy decision related to oil-based fuels," he said.

Rupiah depreciation pressure has moderated in April 2013 with less intensity in line with an increase on capital inflows. On point to point basis, Rupiah depreciated by 0.05% (mtm) and reached Rp9.723 per US dollar with its volatility remained in check.

Higher demand for foreign exchange was offset by the supply from non-resident, supported by positive perception in Indonesia’s economy after global bond issuance by the government.

"S&P’s outlook cut, from positive to stable, has only affected the rupiah exchange rates temporarily," said Difi.

Going forward, He added that  Bank Indonesia will continue its policy toward safeguarding the stability of the rupiah in accordance with its economic fundamentals as well as will continue its efforts to deepen the foreign exchange market. (Dyah Megasari Anjaya)