BI Rate Kept at 7.5%

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  • TEMPO.CO, Jakarta - Bank Indonesia (BI) has decided to keep its benchmark interest rate (BI Rate) at the 7.5 percent, believing it is "still consistent with efforts to control inflation to remain on target," BI governor Agus Martowardojo said yesterday.

    The central bank said this year's inflation target was set at 3.5 to 5.5 percent, while next year' inflation is pegged at three to five percent.

    Based on recent developments, inflation in the third quarter reached 4.53 percent, down from the previous quarter's 6.7 percent. "Inflation is maintained; supported by controlled core inflation and food [price] volatility," said Agus.

    Agus said BI will continue to watch for inflation risks, especially the government's plan to adjust subsidized fuel prices. BI will implement a number of measures to ensure that the hike's impact will be minimum and brief, such as by strengthening coordination with the central and local governments to control inflation.

    Joshua Pardede, an economist with Bank Permata, said BI's decision to maintain the BI Rate indicates an economic slowdown. However, it also shows that the government is prepared to control inflation. Compared to other countries' benchmark interest rate, Indonesia's 7.5 percent is considerably high, he said.