TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
BI rate may not go up, despite fuel price hike: Mirza
Bank Indonesia (BI) has signaled that the current benchmark interest rate in the economy may already be sufficiently high to counter a potential spike in inflation caused by an adjustment of fuel prices
Change Size
B
ank Indonesia (BI) has signaled that the current benchmark interest rate in the economy may already be sufficiently high to counter a potential spike in inflation caused by an adjustment of fuel prices.
The team of president-elect Joko 'Jokowi' Widodo has declared its commitment to increase the price of subsidized Premium gasoline by between Rp 1,000 and Rp 3,000 per liter, from the current price of Rp 6,500 (US 54 cents) per liter, as early as November this year.
'If the subsidized fuel is increased by Rp 2,000 per liter, the additional inflationary effect may increase by around 2.2 to 2.3 percent from our inflation forecast next year,' BI Senior Deputy Governor Mirza Adityaswara told reporters on Monday night in Jakarta.
'The current BI rate of 7.5 percent may still be adequate in that situation,' he added.
While a potential adjustment in fuel prices may drive up prices, Indonesia in fact already has a wide real interest rate gap in the economy.
The benchmark BI rate currently stands at 7.5 percent while the country's inflation print in August fell to 3.99 percent, the lowest level in almost two years, with the high real interest rate gap consequently boosting the returns of investing in rupiah bonds and attracting foreign investors.
Nevertheless, Mirza dropped a signal that the central bank would not loosen its monetary policy very soon, arguing that the high BI rate might still be needed to counter potential capital outflows triggered by the increase of interest rates in the US.
