Monday, October 6, 2008
BI Likely to Raise Interest rate by 25 BPS : Economist
Source: Antara News

Jakarta, (ANTARA News) - The fact that Indonesia’s inflation rate in September reached 0.97 percent is likely to compel Bank Indonesia (BI) to raise its interest rate by as much as 25 basis points (bps) to 9.5 percent, an expert said here Monday.

"Considering that recently the US dollar strengthened against other currencies and our own currency rate is now Rp9,500 per US dollar, along with expectations of high inflation, I think, the central bank will raise its interest rate by up to 25 basis points," Ryan Kiryanto, an economist, said.

He said with the September inflation rate of 0.97 percent pushing up the year-on-year inflation rate to 12.14 percent, the central bank was left with two options, namely to maintain its present interest rate or raise it by 25 basis points from 9.25 percent to 9.5 percent.

By raising its interest rate now, the central bank would not need to increase it again if the inflation rates in November and December remained less than one percent, he said.

"I think market players will consider the step reasonable. Under the present uncertain global economic conditions, it is important for the central bank to pursue carefully measured monetary policies," he said.

The higher BI interest rate was not likely to prompt other banks to raise their interest rates as liquidity conditions were tight following previous interest hikes, Kiryanto said.(*)