Bank Indonesia keeps BI rate steady at 5¾%, reports weak exports

By Ashley Montgomery

Kansas City, Kan., Aug. 9 - Bank Indonesia announced that at a meeting on Thursday its board of governors decided to maintain the BI rate at 5¾%.

Just as last month, the board said that the inflation forecast is expected to remain low and contained within its target range of 4½% plus or minus 100 basis points for 2012 and 2013.

Inflation remained in check in the second quarter, though it increased slightly due to seasonal factors associated with Ramadan and rising food prices. Month-to-month inflation was 0.7%, and year-over-year core inflation was 4.56%.

The board also reported that the rupiah depreciated in July by 0.56% month to month to Rp 9,445 to the dollar on a point-to-point basis. Pressure on the rupiah was associated with the euro crisis, tepid recovery in the United States, slow growth in China and weaker exports.

The board said that declining exports are affecting Indonesia's external performance. As a result, the current account deficit increased in the second quarter, but the deficit is not expected to compromise macroeconomic stability.

The board still expects growth in Indonesia's economy at 6.1% to 6.5% in 2012 and at 6.3% to 6.7% in 2013. Despite a decline in exports, buoyant consumption and investment growth spurred import growth and supported 6.4% economic growth in the second quarter, the board said.

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