BI hints at steady rate through December
The Jakarta Post, Jakarta
The central bank has hinted that it will not raise interest rates up until the year's end, even amid rising global rates, signifying once again its intention of maintaining a tight-biased monetary policy without sacrificing economic growth.
Bank Indonesia (BI) Governor Burhanuddin Abdullah said on Wednesday that BI would refrain from raising its key interest rate again despite the latest rate hike from the U.S. Federal Reserve.
"We will keep to our monthly schedule," he said.
The Fed raised on Tuesday its benchmark interest rate by 25 basis points (bps) to 4.25 percent, but indicated that this may be the last hike for a while.
As with other central banks around the world, BI usually follows the Fed trend to keep the rupiah attractive against the U.S. dollar. The central bank last hiked its BI rate by a lower- than-expected 50 bps to 12.75 percent earlier this month, its sixth hike to tame inflation and support the rupiah.
With an 8.5 percent difference between the BI rate and the Fed rate, Burhanuddin explained that it would still be sufficient to support the rupiah.
"This is among the highest differentials in our history, although we will still await further developments," he said.
BI's Board of Governors is slated to hold its monthly meeting later this month, and is due to also present its assessment of the Indonesian economy over the past year this Thursday.
BI managed to take Rp 16.7 trillion (some US$1.69 billion) from its one-month SBI promissory notes at a rate of 12.75 percent.
Separately, BI Deputy Governor Aslim Tadjuddin said that the central bank believed the rupiah could strengthen by some 3 percent, reiterating its forecast of a rate of between Rp 9,700 and Rp 9,800 per dollar by the year's end.
"The rupiah's real effective exchange rate is still some 97 percent," he said.
The rupiah ended lower on Wednesday at Rp 9,795 against the dollar from Tuesday's Rp 9,787 on what was believed to be increasing domestic demand for oil imports.