Indonesia’s central bank left its key interest rate unchanged for a fifth straight month on Tuesday amid sluggish economic growth.
The Board of Governors maintained the benchmark rate at 7.50 percent, the Bank Indonesia said in a statement. The deposit facility rate was retained at 5.50 percent and the lending facility at 8.00 percent.
The decision is congruent with efforts to control inflation within the target corridor of 4?1 percent this year and next, the bank said in a statement.
Bank Indonesia estimated that growth was limited in the second quarter, but expects it to rebound in the three months to September. The bank also said export growth was subdued due to a sluggish global economy and persistently low international commodity prices.
The bank expects economic growth to improve during the second half of this year on implementation of infrastructure projects and increased lending by banks.
The central bank attributed the rupiah depreciation primarily to external factors and said it will continue to maintain rupiah stability in line with its fundamental value to support macroeconomic and financial system stability.
Inflationary pressures were less intense in June than previously thought, the bank said. Headline inflation accelerated to 7.26 percent from 7.15 percent in the previous month. Inflation, on a year-to-date basis, was just 0.96 percent in the first half of the year and core inflation was 1.99 percent, the bank said.
These were in line with well-anchored inflation expectations, Bank Indonesia noted, expressing optimism that the inflation target for the year will be achieved.
“While we think rates will stay on hold in the coming months, we expect to see a cut towards the end of the year,” Capital Economics economist Gareth Leather said.
The material has been provided by InstaForex Company – www.instaforex.com