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Jakarta Post

Editorial: Focusing on growth

  • The Jakarta Post

  /   Wed, February 15 2012   /  10:01 am

Taking advantage of the current benign inflation outlook, Bank Indonesia surprised most analysts last week by cutting its policy rate by 25 basis points (bp) to a record low of 5.75 percent in a concerted bid to invigorate domestic consumption and further boost the economy which last year grew a respectable 6.5 percent.

The strongest message of the monetary move, the third surprise rate cut after the 25-bp reduction last October and 50-bp slash in November, is that the central bank is now focusing more on growth, rather than being worried too much about inflation risks and the potential impact on the rupiah.

The central bank seems to believe that inflation will remain within the 3.5-5.5 percent target range even though several analysts foresee stronger inflationary pressures from energy and food prices. It also appears to discard any significant fallout from the slump in Eu...