BI won't rush in easing monetary policy: Miranda
BI won't rush in easing monetary policy: Miranda
JAKARTA (JP): The central bank will not rush in easing its
hard-line monetary stance despite the 0.21 percent month-on-month
deflation recorded in August, a senior Bank Indonesia (BI)
executive has said.
BI deputy governor Miranda Goeltom said on Monday that the
bank would need more convincing data in order to reduce the
benchmark interest rate of its one-month SBI promissory notes.
"We need to wait a couple of months to see whether
inflationary pressure has indeed receded," she said on the
sidelines of a hearing with the House of Representatives
Commission IX for financial and development planning affairs.
The interest rate for BI's one-month SBI notes is currently
17.67 percent, a figure that many believe is too high.
The Central Bureau of Statistics (BPS) announced last week
that the month-on-month consumer price index (CPI) fell by 0.21
percent in August, making it the first drop in deflation since
September last year.
Analysts had predicted that inflationary pressure would
continue to weaken in the coming months as the burden from fuel
and power hikes in July has subsided.
Raden Pardede, a senior analyst at PT Danareksa Securities,
said that the continued weakening of inflationary pressure would
prompt BI to lower its interest rate to between 15 percent and 16
percent.
In the latest Letter of Intent (LoI) signed with the
International Monetary Fund (IMF), the government is expected to
be able to bring the 12-month inflation rate to between 9 percent
and 11 percent this year.
"If inflationary pressure from the real sector is still high,
an excess of liquidity would become very dangerous for us, and
that is what we have to watch out for," Miranda said.
A low interest rate at the bank would result in a high amount
of lending and therefore the amount of money in circulation would
increase, which could result in a higher inflation rate.
Nevertheless, Miranda said that as the economic condition
continued to improve and the rupiah strengthens against the U.S.
dollar, the pressure for a high interest rate would gradually
recede with whatever adjustments the bank made.
"Any adjustments (to the interest rate) would be slight
because there are other factors to be considered," she said.
A dose of fresh air hit the market early last month with the
ascent of Megawati Soekarnoputri to the presidential seat on July
23, and the choice of ministers for her new Cabinet.
The rupiah, which had been dawdling at about Rp 11,000 to the
dollar the week before, suddenly found itself at the Rp 8,500 to
Rp 8,900 levels.
It had dipped slightly last Wednesday to Rp 9,175 which was
attributed to high corporate dollar demand as companies paid off
their overseas debts.
The rupiah closed higher at Rp 8,970 to the U.S. dollar on
Monday's trading, compared to Rp 8,860 on Friday as local
companies with foreign debts bought the dollar in heavy trading.
"But we will see this trend gradually ease off, and demand for
the dollar will soon no longer put pressure on the foreign
exchange market," Miranda said, explaining that most of the
companies had by now repaid their foreign debt
installments.(tnt/03)