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JAKARTA - Indonesian central bank kept on hold its benchmark interest rate at 9.5 percent on Thursday, the bank said. "Amid the current global financial upheaval and slowing of the world economy, the Bank Indonesia (the central bank) thinks that it is necessary to keep a right monetary policy so that it can achieve a balance between the economic growth and efforts to maintain monetary stability," the bank said in a statement.
The central bank raised its benchmark interest rate for the sixth time by 25 basis point last September to 9.5 percent to curb inflation pressure resulted from rising food and energy prices. "It is positive for the market. It is a good sign from the central bank of not tightening its interest rate amid the high pressure," said an analyst Danareksa Purbaya Yudhi Sadewa.
As the bank targeted single digit inflation next year in the range of 6.5 to 7.5 percent, the analyst said that the bank could start to reduce rate by 25 basis points in the coming months. The bank forecast inflation this year would reach between 11.5 to 12.5 percent. "The central bank will maximally use its monetary instruments available and keep coordinating with the government in monitoring the prospect of the global, regional and domestic economies to secure the economic stability in the medium term," the bank said.
Price pressure from food eased in October partly due to weakening of global commodity prices. Declining fuel prices in global markets have also led the Indonesian government to cut unsubsidized fuel prices for domestic industries.
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