Bank Indonesia keeps BI rate steady at 5¾%; rupiah depreciates again

By Toni Weeks

San Diego, Sept. 13 - Bank Indonesia announced that during its meeting on Thursday its board of governors decided to maintain the BI rate at 5¾%.

The current policy rate is considered consistent with the inflation forecast, which 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 benign in the third quarter, though it increased slightly due to seasonal factors and rising food prices. Month-to-month CPI inflation was recorded at 0.95%, and year-over-year CPI inflation was 4.58%. Core inflation was 4.16% for August.

The board also reported that the rupiah depreciated in August by 0.94% month to month to Rp 9,535 to the dollar on a point-to-point basis. Pressure on the rupiah was associated with tepid global economic recovery, uncertainty in the global financial market and strong imports growth amid weaker exports.

The bank said that Indonesia's economy in the third quarter remained in line with economic capacity and that solid economic growth is mainly underpinned by buoyant consumption and investment. The pace of investment remains strong, reflecting business confidence on the economic outlook, strong consumption and supportive investment financing.

Exports are also expected to increase modestly due to better prospects in some of Indonesia's main trading partners, although risks from global economic slowdown is still a source of concern.

Going forward, the board said it will continue to attain external balance in a gradual manner and remain focused on containing inflation.

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