Bank Indonesia to Maintain Tight-Bias Policy, Dismisses Govt Intervention
Jakarta. Bank Indonesia, the country’s central bank, will refrain from lowering its benchmark interest rate despite the country’s slow economic growth in the first quarter.
Bank Indonesia governor Agus Martowardojo said on Friday that the central bank would make any policies based on economic data.
“Our priorities are to keep the macro-prudential stability through the tight BI rate,” he told journalists on Friday, referring to the central bank’s benchmark interest rate.
Indonesia’s economic growth slowed to 4.7 percent in the January-March period, its slowest pace in the past five years, dragged by weak exports and sluggish government spending.
Still, economists noted that the central bank has limited room to boost growth, with as it monitors accelerating inflation and weakening rupiah.
Inflation quickened to 6.8 percent in April from 6.4 percent a month earlier, as consumers coped with rising fuel prices. The rupiah traded at 13,113 against the US dollar on Friday, bringing its declined this year to 6 percent as the country struggles to narrow the gap in its current account deficit. At the same time the dollar has strengthened amid the US recovery.
Bank Indonesia cut its interest rate by 25 basis points in February, as consumer prices declined. The central bank decided to hold the key rate at 7.5 percent at its monthly policy meeting in April.
Vice President Jusuf Kalla said on Thursday that he hoped for the central bank to lower the interest rate gradually. “The condition for interest rates now is looser than last year. We hope it will be lowered gradually,” Kalla said.
Still, Agus dismissed any notion that suggests the government intervening with any Bank Indonesia monetary policy.
“We keep coordinating with the government, but that does not mean we are being interfered. Sorry, I won’t let it happen.”
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Source: The Jakarta Globe