Jakarta (ANTARA News) - Bank Indonesia (BI) said its decision to maintain its benchmark interest rate at 4.25 percent would not cause significant capital outflow, although many other countries have raised their interest rates.

Deputy Governor of the Central Bank Dody Budi Waluyo said here on Friday, Indonesia`s economic recovery is a greater attraction to foreign investors to stay in the country than higher interest rate in other countries.

The policy to keep the benchmark interest rate could reduce the difference between the Indonesian government bond coupon rates and those of other countries, which have raised their interest rates such as the US Treasury, Dody said.

"This also indicates that we are strong enough. We must not see solely from interest rate," he said.

The U.S. Federal Reserve, and central banks of other countries such as Malaysia, China and Singapore already raised their benchmark interest rate earlier this year.

Dody said the growth differential between Indonesia and other countries would compensate for the decision to keep unchanged the benchmark interest rate.

In addition, Bank Indonesia hopes to sustain the country`s economic growth by not tightening its monetary policy,e said.

He said foreign investors also see the prospect of the country`s economic growth especially after Moody`s raised the country`s credit rating and the inclusion of the state sovereign bond to the Global Index Bond.

"Our positive growth if compared with the performance of other countries could make up for the narrowing difference in benchmark interest rates," he said.

The policy of maintaining the benchmark interest rate was also backed up by stability in inflation, and current account, he said, adding with the strong stability BI chose to push for the economic growth momentum by not raising the interest rate, which has remained unchanged at 4.25 percent.

"Why should we raised the interest rate if the current account is still at a healthy level although the spread from other countries` interest rates such as the United States narrowed. That is not the main factor if we could push the economic growth higher," he said.

In the first two weeks of April, there were a total investment of US$800 million in the Indonesian stock market and bond market, as an improved performance from March when there was capital outflows on global financial uncertainty .


Reporter: antara
Editor: Heru Purwanto
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