BI benchmark rate up slightly to 13.62%

BI benchmark rate up slightly to 13.62%

JAKARTA (JP): The benchmark interest rate on the one-month
Bank Indonesia SBI promissory note increased by two basis points
to 13.62 percent during the Wednesday weekly auction, the central
bank said in a statement.

The interest rate increase occurred amid concerns over
stronger inflationary pressure and a weakening rupiah.

Plans by the government to raise fuel prices by an average of
12 percent next month has caused concern the government's 5
percent to 7 percent inflation target for this year may be
exceeded.

The Central Bureau of Statistics said earlier inflation this
year could reach 9 percent, citing in particular higher fuel
prices.

The central bank also has increased the benchmark interest
rate to help stabilize the ailing rupiah.

Concern over continuing domestic political uncertainty and
threats of an economic embargo by the international community
following the killing of three United Nations humanitarian
workers in Attambua, West Timor, have increased the pressure on
the rupiah.

The rupiah ended at Rp 8,835 to the U.S. dollar in late
trading on Wednesday, compared to its Tuesday close of Rp 8,840.

The higher interest rate on the SBI promissory note will
increase the cost of the country's bank recapitalization program,
which the government has issued bonds to help finance. The bonds'
interest rate is partially linked to the SBI rate. The state
budget covers the interest of the bonds.

Elsewhere, Bank Indonesia said its foreign exchange reserves
increased slightly to US$27.99 billion as of the week ending on
September 22, from $27.29 billion the previous week.

BI said the increase was mainly the result of oil and gas
revenue and export payments.

The central bank also said base money decreased Rp 1.18
trillion to Rp 93.19 trillion during the same period.

BI said the slide was due to a decline in bank notes in
circulation.

The central bank said net domestic assets during the same
period moved to Rp 23.54 trillion from negative Rp 20.51
trillion.(rei)