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Indonesia c.bank Raises Key Rate; Says May `Adjust' Further
May 6 -- Indonesia's central bank unexpectedly raised interest rates
for the first time in more than two years to tame inflation and said
it will consider further increases.
Bank Indonesia raised the benchmark rate used as a reference for bill
sales to 8.25 percent from 8 percent, acting Governor Miranda Goeltom
said in Jakarta today. The decision was predicted by just three of 18
economists surveyed by Bloomberg
Soaring prices of food and kerosene propelled inflation to 9 percent
last month in Southeast Asia's largest economy. Indonesia's government
is preparing to increase fuel costs by as much as 30 percent, which
may further stoke price gains.
``Bank Indonesia is taking a lead here,'' said Lim Su Sian, an
economist with DBS Group Holdings Ltd. in Singa****e. ``It's a signal
that they are doing something to control prices, though their ability
to bring inflation down is limited.''
Lim expects the central bank to raise its benchmark rate to 8.75
percent by the end of the year.
``Today's move suggests that Bank Indonesia's main policy concern has
****fted from growth to inflation,'' Matt Hildebrandt, a Singa****e-
based economist at JPMorgan Chase & Co, said in a note to clients.
China, India and Pakistan have raised borrowing costs this year as
Asian nations grapple with record food and fuel prices. Philippine
central bank Governor Amando Tetangco said today he would ``act
decisively'' to contain inflation expectations.
The Reserve Bank of India on April 29 unexpectedly ordered lenders to
set aside more funds for the second time in less than two weeks,
raising its cash reserve ratio to 8.25 percent from 8 percent. China
last month increased its limit for the third time this year to a
record 16 percent.
Here is a partial text of some key comments translated from a
statement released by Bank Indonesia after its policy meeting.
"Inflationary pressures are seen higher due to high global commodity
prices and domestic factors related to the high consumption of non-
food items."
"To manage expectations, Bank Indonesia will continue to adjust BI
rate in line with inflation trend."
"High inflationary pressures on the core inflation are influenced by
expectations of higher commodity prices and market expectations of a
fuel price hike."
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