"Judging by the monetary policy views issued recently, it seems likely that BI will not lower its key rate until the end of 2014," KEN chairman Chairul Tanjung said.Jakarta (ANTARA News) - Bank Indonesia (BI), the countrys central bank, is likely to maintain its benchmark interest rate at 7.5 percent until the end of 2014, the National Economic Committee (KEN) has predicted.
"Judging by the monetary policy views issued recently, it seems likely that BI will not lower its key rate until the end of 2014," KEN chairman Chairul Tanjung said at a seminar here on Tuesday.
The central bank is more worried about the current account deficit than inflation, slowing economic growth or the unemployment rate, he added.
"Lowering the current account deficit is the only way to maintain economic stability, which monetary authorities are keenly aware of," he noted.
He predicted that inflationary pressures would be lower in 2014 compared with 2013.
If BI is consistent in its inflation targeting policy and the inflation rate falls to five percent, there will be room to cut the interest rate to six percent, he added.
Historical data suggests that national economic growth is heavily influenced by the interest rate, he said, adding that high rates tend to slow economic growth, while lower rates lift the pace of economic growth.
"Typically, our economy grows quickly when the benchmark interest rate is lower than 6.5 percent," he pointed out.
The current BI rate, which is 7.5 percent, is unlikely to harm the national economy in any way, he added. It is also unlikely to push the economy into recession.
However, current monetary policy is unlikely to deliver high economic growth rates, he said.
"That means the economy will find it tough to grow at a fast pace in 2014 compared with 2013," he noted.
BI raised its benchmark rate to a four-year high of 7.5 percent in November to prop up the weakening rupiah and reduce the persistently high current account deficit. (*)
Editor: Heru Purwanto
Copyright © ANTARA 2013
