Indonesia’s Central Bank Says It Has Scope to Cut Policy Rate
Indonesia’s central bank said it has room to cut its benchmark interest rate further after inflation slowed more than economists expected in May.
Bank Indonesia expects inflation to slow to between 5 percent and 6 percent in 2010, Senior Deputy Governor Miranda Goeltom told lawmakers in parliament today. Consumer prices rose 6 percent last month from a year earlier after gaining 7.3 percent in April, a government report showed today. Economists had forecast a 6.2 percent increase.
The central bank has cut its policy rate for six straight months to bolster consumer demand, which makes up more than 60 percent of Southeast Asia’s biggest economy. Bank Indonesia may pause after reducing borrowing costs again on June 3 amid rising consumer confidence and recovering exports, said Prakriti Sofat, an economist with HSBC Holdings Plc.
“Bank Indonesia definitely has the flexibility to ease rates,” said Singapore-based Sofat faxless payday loans. However, “we think the bank is very close to the bottom in rates.”
The central bank predicts the economy will expand at the higher end of its 3.5 percent-to-4.5 percent range this year, Goeltom said today. The bank on May 5 cut its policy rate to 7.25 percent. The $433 billion economy may grow between 4 percent and 5 percent next year, she said.
The rupiah, the best performing among 10 most-traded Asian currencies outside Japan this year, may strengthen next year, Goeltom said. The rupiah rose 0.8 percent to 10,230 against the dollar at 5:16 p.m. in Jakarta.
Indonesia’s exports fell 22.9 percent to $8.46 billion in April from a year earlier, the statistics office said today. That’s the slowest pace of decline since December.
Filed under: business by Finance Boss