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Jakarta Post

BI holds rate, cautious on trade deficit

  • Esther Samboh

    The Jakarta Post

Jakarta   /   Fri, August 10 2012   /  11:05 am

Indonesia’s central bank held its benchmark interest rate on Thursday at the record-low 5.75 percent, as expected, citing concerns over a current account deficit that could hurt investors’ confidence in the country’s assets, including the rupiah.

Weaker exports, followed by rising imports due to higher domestic demand despite the global slowdown, have created a deficit in Indonesia’s trade balance for three straight months, and its current account also suffered a deficit for a second consecutive quarter.

“The current account deficit increased in the second quarter of 2012, but it is forecast to decline in the second half of the year,” Bank Indonesia (BI) announced in a policy statement after a monthly meeting attended by the five-member board of governors.

The central bank has vowed to improve the current account deficit to a “sustainable” level by en...