BI revises 1999 inflation forecast to single digit
BI revises 1999 inflation forecast to single digit
JAKARTA (JP): Bank Indonesia revised on Tuesday its 1999
inflation forecast to a single digit from an earlier projection
of 10 percent to 13 percent.
The central bank said in a statement issued after its board of
governors meeting that a consequence of its tight monetary policy
introduced previously would be the continued curbing of
inflation.
It added that the availability of unused production capacity,
a sufficient supply of basic necessities, the undisturbed
distribution of goods and a stronger and stable rupiah would help
the country reach the new inflation target.
"All these factors are expected to continue (to curb
inflation) over the next few months so that the inflation rate by
the end of 1999 could reach a single digit, which is lower than
previously projected," BI said.
It said the aforementioned factors had been part of the reason
for negative inflation over the past four months.
Inflation in March, April, May and June respectively was 0.18
percent, 0.68 percent, 0.28 percent and 0.34 percent.
The economy suffered hyperinflation of 77.63 percent last year
when the economic crisis was at its peak.
"Based on the positive development, the board of governors
decided the course of the monetary policy in the coming months
would be to continue to ease the liquidity condition carefully,"
BI said.
It added that a consequence of easing the liquidity condition
could have a bad effect on inflation.
"With the expectations of a lower inflation rate and the
relative stability in the exchange rate of the rupiah and in line
with continuity in relaxing the liquidity condition, the interest
rate of one-month promissory notes at year-end is estimated to be
lower than the previous projection," the central bank said.
Bank Indonesia deputy governor Miranda Goeltom projected on
Monday that the benchmark interest rate of one-month Bank
Indonesia promissory notes (SBI) would drop to below 15 percent
by the end of this year.
The central bank earlier projected the benchmark rate would
fall to around 17 percent.
Miranda also said the benchmark rate was expected to fall by
between 100 to 150 basis points to more than 17 percent at
Wednesday's auction.
The benchmark rate hovered at more than 35 percent early this
year, and at 70 percent last August.
She also projected that the interest rate on three-month SBI
promissory notes would drop to below 15 percent by year-end
compared to the current level of 23.33 percent.
Bank Indonesia said the improving trend of monetary conditions
had started to revive the real sector.
The central bank pointed out that several banks had started to
lend limited amounts of money, had shown positive second quarter
gross domestic growth and had a pick in foreign capital inflow
primarily through the stock market.
"With a relative stable political condition, the board of
governors is optimistic that this development will provide
positive sentiment to the process of sustainable economic
recovery," Bank Indonesia said. (rei)