BI plans to raise rates to stem inflation<\/p>\n
Indonesia's central bank said it will raise interest rates in \"a
\ngradual and measured manner\" this year because a government
\ndecision to increase fuel prices threatens to stoke inflation.<\/p>\n
\"To mitigate inflationary pressure due to the fuel-price
\nincrease, there is a need to make more preventative and other
\nefforts,\" Erwin Riyanto, Bank Indonesia's head of public
\nrelations, said in a statement late on Tuesday after a meeting of
\nthe bank's board of governors.<\/p>\n
The inflation rate, already close to a 21-month high, may rise
\nfurther after the March 1 decision by the government of President
\nSusilo Bambang Yudhoyono to reduce fuel subsidies.<\/p>\n
The central bank also wants to shore up the rupiah, which has
\nweakened 1.1 percent this year, said economist Anton Gunawan.<\/p>\n
\"It's an effort to keep inflation in check and prevent the
\nrupiah from declining further,\" said Gunawan of Citigroup Inc.,
\nwho predicted that the central bank's key one-month rate would
\nrise 1 percentage point or less this year from 7.43 percent.<\/p>\n
\"I don't think the central bank will increase the rates
\ndrastically,\" Gunawan said.<\/p>\n
The 7.43 percent yield on one-month Bank Indonesia bills at
\nthe March 2 auction was unchanged from the previous sale on Feb.
\n16.<\/p>\n
Consumer prices in February rose 7.2 percent from a year
\nearlier, slowing from a 7.3 percent increase in January, which
\nwas the highest since April 2003.<\/p>\n
Indonesia's government, moving to reduce its $3.1 billion
\nbudget deficit, last week scrapped most subsidies, leading to an
\naverage 29 percent rise in the cost of fuel.<\/p>\n
The central bank repeated its forecast for economic growth of
\nbetween 5 percent and 6 percent in the first quarter. --
\nBloomberg<\/p>",
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"sponsor": "Okusi Associates",
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