HONG KONG: The central bank's decision not to raise rates recognises that higher borrowing costs could make rising food and fuel prices more painful. Better to let a rising currency counteract imported inflation. The cost may be higher asset prices -- but this seems like the right trade-off.
CONTEXT NEWS
-- Indonesia's central bank said on March 4 it was holding its benchmark interest rate steady at 6.74 percent but that it would watch inflation and control imported inflation by allowing its currency to strengthen.
-- Indonesia's consumer price index in February, a measure of annual price increases, fell to 6.8 percent from 7 percent in January. Core inflation, which excludes food prices and other costs subsidised by the government, rose to 4.5 percent from 4.2 percent in January. The rupiah has risen 3 percent since Jan. 24.
-- The Bank of Korea also left rates unchanged in February. It left its benchmark policy rate at 2.75 percent despite a 4.1 percent increase in consumer prices.
-- Fitch, the credit ratings agency, said last month that Indonesia was close to achieving an investment grade ratings for the first time since the Asian financial crisis of 1997-1998 thanks to a strengthening economy and an improving credit profile.
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