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Jakarta Post

Analysis: Indonesia on track to lift rates by 3Q10

  • Harry Su

  /   Thu, April 8 2010   /  10:41 am

The Indonesian central bank, Bank Indonesia (BI), left rates unaltered at 6.5 percent when the board of governors met on 6 April. This is in line with our expectation given March’s slight deflation and bank credit growth still weaker than the authorities would like to see.  The policy statement did not provide much guidance in terms of when the central bank expects rates will change. BI is currently relaxed about gains in consumer prices and expects inflation, which slowed to 3.4 percent year-on-year in March, will stay under its 6 percent target ceiling in 2010. We are not too certain.   We are of the view that BI needs to be forward looking, particularly as the domestic economic upswing will remain strong while commodity prices move higher and electricity tariff increases are set to be implemented in July (i.e. 10 percent for low-end users and 15 percent for middle-up ...