The central bank`s board of governors meeting on Thursday said the drop in the inflationary pressure was seen in the index of consumer prices (IHK) in October which showed a deflation of 0.12 percent (month-to-month) or 4.42 percent (year-on-year), driven by deflation in the core and volatile food groups.
The deflation of the core group occurred because of a decline in the global commodity prices especially gold while the deflation in the price of foods was driven by improving production and imports and smooth distribution.
"The rate of inflation in 2011 is predicted to go below the target of around 4.0 percent," BI governor Darmin Nasution said.
It is the low inflation pressure until the end of this year and next year that has among others encouraged BI to decide to lower the BI Rate by 50 basis points to 6.00 percent on Thursday to improve short-, medium-and long-term structure.
Darmin said the lowering of BI Rate was also aimed at reducing the impact of the worsening prospects of global economy on Indonesia.
Overall, in 2011 the economy is expected to grow 6.5 percent. Sectors that are expected to be the main drivers are industry, trade, hotel and restaurant, transportation and communication.
The board of governors viewed until now the domestic financial market continued improving in line with various policies that have been taken by Bank Indonesia and the government to mitigate the impact of the current global economic turmoil.
That has been reflected by the performance of the stock exchange that is improving and the yields of state bonds that have dropped.
The inter-bank rate of interest also tended to decline in line with the availability of liquidity.
"In connection with this the BI Rate adjustment to 6.00 percent is expected to be able to improve the structure of interests according to various terms," he said.
In October BI cut the rate from 6.75 to 6.5 percent.
(Uu.H-YH/HAJM)
Editor: Priyambodo RH
Copyright © ANTARA 2011
