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Indonesian central bank keeps rate unchanged at 6.75%

05-12-2011 17:13 BJT

JAKARTA, May 12 (Xinhua) -- Indonesian central bank on Thursday refrained from raising its basic rate for the third straight months and kept it at 6.75 percent, as economic growth eases and it relies on rupiah appreciation to curb imported inflation, the bank said in a statement.

Indonesia's economic growth accelerated at the slower pace at the first quarter to 6.5 percent after registering 6.9 percent at the fourth quarter.

The central bank governor council considered that it was necessary to strengthen macro-prudential policy to ease the risk of sudden capital reversal amid the rapid capital inflow into the country, and to help the appreciation of rupiah in line with the movement of the currencies in the region.

Indonesian President Susilo Bambang Yudhoyono has targeted an average of annual economic growth of 6.6 percent by the reminder of his term by up to 2014. The government has delayed the removal of oil subsidy policy from the initial target on April 1 and the central bank has allowed the rupiah to appreciate to contain imported inflation. But, recently the bank said it would monitor the strengthening of the currency to make it not move too far.

Inflation has eased in Indonesia since February as food supplies improved. But the bank will pay attention on the possibility of rising inflation pressure in the future.

"Going forward, the central bank will be caution over inflation pressure, particularly the price hikes from the international commodities, rising domestic demand, and the government policy over the removal of oil subsidy and the possibility of disturbance of food supply,"the bank said.

Indonesia's annual headline inflation reached 6.16 percent in April, after accelerating slower in March at 6.65 percent, the National Statistic Bureau announced on May 2. On month, deflation reached 0.31 percent in April after reaching deflation 0.32 percent in March, it said. But, the core inflation, which exclude volatile food and energy prices have accelerated to 4.62 percent in April from 4.45 percent in March, the bureau said.

The central bank forecasted inflation will end at 4 percent to 6 percent at the end of this year. With the rapid capital inflows, rupiah appreciated by 1.68 percent in April to 8,564 against one U. S. dollar, the bank said.

Nearly-zero interest rate in advanced nations has spurred seeking-higher-yield funds to flow into emerging markets, including Indonesia which offer higher yield. The flows has reduce bond yield in the country.

The central bank forecasted Indonesia's economy to grow by 6.4 percent in the second quarter and 6.5 percent in this year.

Editor:Wang Xiaomei |Source: Xinhua

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