Indonesia's central bank kept its benchmark overnight rate at a record low 6 percent on Thursday as anticipated, pausing because it expects recent rate cuts to help to stimulate the domestic economy next year as global growth slows. Economists said this could mean a pause of at least several months following Bank Indonesia's surprise 75 basis points of cuts in October and November combined.
The central bank is likely worried that further cuts could lead investors to keep selling the rupiah. Thursday's decision to pause came on the same day central banks in South Korea and New Zealand kept their rates on hold. Indonesia made clear cuts will resume when monetary authorities think they are needed. "Bank Indonesia will continue to optimise the momentum of interest rate cuts to make an effective stimulus to the economy," the central bank, known as BI, said in a statement.
Indonesia's economy had steady annual growth of 6.5 percent in the first nine months of this year on buoyant domestic spending and investment, and BI on Thursday lifted its growth expectation for 2012 to between 6.3 percent and 6.7 percent, from 6.3 percent previously.
"The board of governors sees the current BI rate level as still consistent with the inflation target ahead and still conducive to guard financial stability while reducing the negative impact of the global economy on Indonesia," BI said. "Evaluations on economic performance and prospects in general show the domestic economy remains strong and stable." Eleven of 15 economists in a Reuters poll had expected Thursday's rate hold after annual inflation eased in November to a 19-month low of 4.15 percent, near the floor of BI's year-end target range of 4 to 6 percent. The other four forecast a 25 bps cut.
Comments
Comments are closed for this article.