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)