Bank Indonesia mulls lowering interest rate<\/p>\n
JAKARTA (JP): Bank Indonesia (BI) will allow its benchmark
\ninterest rate to decline if pressure on prices and the rupiah
\ncontinue to lessen over the next couple of weeks, central bank
\ndeputy governor Miranda Goeltom said on Thursday.<\/p>\n
Miranda said that although Bank Indonesia would retain its
\ntight money policy for the moment it was possible that reign over
\nthe policy would be considerably lessened in the near future.<\/p>\n
\"I think if deflation is retained this September and there is
\nno longer any persistent pressure on the rupiah, then there is
\nevery possibility to relax the monetary policy,\" she said on the
\nsidelines of a hearing with the House of Representatives
\nCommission IX for financial and development planning affairs.<\/p>\n
Miranda said that the weakening of the rupiah over the past
\nthree days was only a \"hiccup\", and not a persistent threat to
\nthe exchange rate.<\/p>\n
\"Without any persistent pressure on the rupiah, of course the
\nway toward a relaxed monetary policy will become more open,\" she
\nadded.<\/p>\n
Miranda said that the bank's job was to keep the country from
\nhigh inflation, which was also part of the deal with the
\nInternational Monetary Fund (IMF). In the latest letter of
\nintent, the government agreed to bring the 12-month inflation
\nlevel to well within the 9 percent to 11 percent target range by
\nthe end of the year.<\/p>\n
\"But we also need to see if liquidity is a problem at this
\ntime, and we should treat that with care,\" she added.<\/p>\n
Miranda said that the bank's policy to absorb only 53 percent
\nof the bids offered for Bank Indonesia's one-month SBI promissory
\nnotes at the weekly auction on Wednesday was an indication of the
\nbank's greater faith in the economy because it gave it greater
\nliquidity to maneuver.<\/p>\n
\"That's the hint, that means there is a potential to lower the
\ninterest rate in the weeks to come,\" she said.<\/p>\n
Miranda stressed that the downturn in the rupiah to the U.S.
\ndollar recently was only temporary and caused by speculators
\nspinning off rumors that Osama bin Laden, the prime suspect of
\nthe U.S. attack last week, may have been hiding in the country.<\/p>\n
There was no rational reason for the rupiah to weaken but that
\nof the \"911\" attack in the United States last week, she said,
\nreferring to the attacks which came on Sept. 11.<\/p>\n
\"The market became a bit worried, followed by those widespread
\nrumors, which, although unbelievable, could be used to provoke
\nthe market,\" Miranda said, adding that as the rumor eases, the
\nrupiah should become more stable within the next few days.<\/p>\n
The rupiah has been under pressure over the past three days,
\nwhich analysts said was due to a combination of high corporate
\ndollar demand to repay debts and the uncertainty created by last
\nweek's terrorist attacks on the United States.<\/p>\n
The local currency, which had enjoyed strong rates after
\nMegawati Soekarnoputri's ascension to the presidency, had dropped
\nto levels of Rp 9,500 this week. The rupiah had been hovering at
\nRp 11,000 prior to Megawati's presidency.<\/p>\n
The dollar was quoted between Rp 9,425 and Rp 9,470 late
\nThursday, much lower than Rp 9,530 to Rp 9,590 late Wednesday.<\/p>\n
The U.S. currency touched an intraday high of Rp 9,735 as
\nlocal companies bought dollars to repay debts or to pay for
\nimports.<\/p>\n
Analysts said that the higher rupiah rate was caused by
\nforeign players taking profits on the dollar's recent strength.<\/p>\n
Bank Indonesia had also reportedly sold about US$10 million
\nthrough brokers to help the local currency.<\/p>\n
However, analysts said that the rupiah was also facing
\npressure over a possible retaliation by the United States, which
\ncould incite further unrest in Indonesia as it has the world's
\nlargest Muslim population.<\/p>\n
Miranda reiterated earlier statements that Bank Indonesia
\nwould take steps to assure that the rupiah would not fall any
\nfurther.<\/p>\n
\"We still have room to intervene, but of course I will not
\ntell you whether we have or have not done so,\" she said.(tnt)<\/p>",
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