BI says monetary condition is improving

BI says monetary condition is improving

Fitri Wulandari, The Jakarta Post, Jakarta

The country's monetary condition has continued to improve, which
bodes well for the recovery of the economy, Bank Indonesia says.

The central bank said in a statement following its board of
governors meeting on Wednesday, that the upbeat assessment of the
monetary picture was based on the recent declining trend in
inflation, the stronger rupiah, and the lower interest rate of
Bank Indonesia SBI promissory notes.

Bank Indonesia was quoted by Antara as saying that to maintain
the situation, the central bank would keep the base money level
within its indicative range, while at the same time it would try
to gradually and carefully lower interest rates.

The rupiah has surged to a nine-month high of around Rp 8,500
per U.S. dollar at one point this week amid a host of positive
news at home and the global weakening of the dollar.

Year-on-year inflation has also been declining during the past
couple of months, thanks to the stronger rupiah and lower food
prices.

The easing inflationary pressure coupled with the appreciation
of the rupiah has allowed Bank Indonesia to guide its benchmark
interest rate to 15.16 percent on Wednesday, compared to more
than 18 percent late last year.

Bank Indonesia said that inflation would likely ease further
in the coming months, while the rupiah would continue to get
stronger.

Positive development in the above monetary indicators are seen
crucial to support the country's economic recovery process.

The stronger rupiah, easing inflationary pressure, and a lower
interest rate environment should be positive for businesses as
consumer confidence increased.

The lower interest rate would also help ease the burden of the
state budget in covering the coupons of bonds issued to bailout
banks in the late 1990s.