Bank Indonesia has signaled to markets that it expects consumer prices to ease from recent highs, keeping it policy rate unchanged at 6.50% Thursday. Inflation hit 4 1/2-year high in July after the government raised subsidized fuel prices in late June.
BI also kept the main money-market rate - or Fasbi - steady at 4.75%.
"Inflationary pressures are expected to ease going forward as seasonal factors from Eid al-Fitr celebtrations and the new school year dissipate," Bank Indonesia said in a statement.
BI raised the key rate by a total of 75 bps in its June and July policy meetings, however the decision to stand pat in August was expected, with
six of 11 economists polled by Dow Jones Newswires forecasting no change in the rate. Inflation in July reached 8.61% year on year compared with June's 5.90%, however the CPI is expected to ease in coming months.
BI on Thursday also indicated it will move towards more macroprudential measures, including tightening reserve requirement rules for commercial banks to absorb excess liquidity. Banks with loan-to-deposit ratios higher than 92% will be required to add their secondary reserves, according to BI spokesman Peter Jacobs. He said a new monetary instrument for domestic banks, along with the RRR changes, will be detailed further incoming months.
He also said that the central bank will seek to curb loan growth for sectors which relied heavily on imports, further signalling the authorities' concerns over the country's current account deficit.
Extended falls in commodity prices have hurt exports while increasing middle class consumption has been pushing imports higher, creating persistent trade deficits - the current account has been in deficit for the last seven quarters.
In its statement, Bank Indonesia said that risks of slowing growth "remains significant", providing a slight hint of growth concerns among policymakers after the economy grew less than 6% in the second quarter.
Back to News
Leave e message
0 Comments