BI keeps key interest rate unchanged<\/p>\n
The Jakarta Post\/Jakarta<\/p>\n
The central bank left on Wednesday its benchmark interest rate
\nunchanged defying earlier expectations that Bank Indonesia would
\npush the rate higher amid stronger inflationary pressure and the
\nrising interest rate trend in the U.S.<\/p>\n
The interest rate on the one-month SBI promissory notes was
\nunchanged at 7.37 percent during a twice-weekly auction of the
\nnotes.<\/p>\n
No explanation was given behind the move, but it could well be
\nseen as a sign that Bank Indonesia's concerns about inflationary
\npressure had eased.<\/p>\n
The central bank said earlier that it was keeping an interest
\nrate increase as an option in order to retain monetary stability
\namid strong pressure on the rupiah.<\/p>\n
The fragile rupiah, which pushed up the prices of imported
\ngoods, helped in part lift the inflation level, as the Central
\nStatistics Agency (BPS) reported that year-on-year inflation in
\nJuly had reached a worrying 7.2 percent, higher than the official
\ntargeted average rate of 6.5 percent.<\/p>\n
Bank Indonesia's decision should provide assurance that banks
\nwould not raise lending rates, at least for now, which would
\notherwise hurt the economy.<\/p>\n
Bankers have mostly opposed the rapid increase in BI's
\ninterest rate, saying it would eventually force them to raise
\ntheir interest rates for loans. Some have said that, even if the
\ncentral bank was to raise the SBI, it had to be conducted in
\nphases and at a small margin as well.<\/p>\n
A gradual, limited increase in SBI promissory notes remains
\nthe best solution to strike a balance between easing pressure on
\nthe rupiah and inflation, and keeping banks from raising their
\nlending rates.<\/p>",
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