CNA – Indonesia’s central bank yesterday kept its benchmark interest rates unchanged for a third straight meeting, predicting headline inflation would be back within its target sooner and after the rupiah currency strengthened significantly.
Southeast Asia’s biggest economy has been supported by a commodities-led export boom, though economists expect a slowdown in growth as tighter monetary policy across the world weighs on global demand.
Bank Indonesia (BI) left the seven-day reverse repurchase rate unchanged at 5.75 per cent, as expected by all 30 economists polled by Reuters. It also kept steady its two other policy rates. Governor Perry Warjiyo told a news conference the current benchmark level remained sufficient to keep core inflation within BI’s two to four per cent target range and steer headline inflation to within the same target band sooner than previously estimated.
“Last month inflation was already at 4.9 per cent, this will continue easing… We believe that starting August, it could be below four per cent,” he said, referring to the headline inflation rate in March of 4.97 per cent.
BI previously expected headline inflation to return to target in September. Meanwhile, with sentiment for riskier assets improving amid market forecasts that United States (US) rates were near their peak, the rupiah has strengthened by almost four per cent in the past month, even with some depreciation this week.
BI said the rupiah could continue appreciating, supported by capital inflows and Indonesia’s current account surplus.
