Jakarta (ANTARA News) - Bank Indonesia has decided to maintain its key interest rate at 7.5 percent, a level considered to be in line with the tight monetary policy toward achieving the 3.5-5.5 percent inflation set for 2014.

"During the Bank Indonesias Board of Directors Meeting, it was decided that the central banks benchmark interest rate (BI Rate) at 7.5 percent with the interest rates of lending facility and deposit facility respectively set at 7.5 percent and 5.5 percent, will be maintained," Bank Indonesia (BI) Governor Agus Martowardojo informed the press, here on Thursday.

Regarding BIs decision to maintain its previous benchmark rate, leading economist Aviliani from the EC Think predicted that BI will maintain its relatively high benchmark interest rate (BI rate) of 7.5 percent until the second quarter of this year.

"The central bank is likely to maintain the BI rate for the first half of the year," Aviliani stated, here on Thursday.

She added that inflation in 2014 is expected to be back at its normal trend and the BIs inflation target of 3.5-5.5 percent could become a reality.

In the second half of 2014, she hopes that the central bank will cut the BI rate with the certainty that the US central bank will stop financial stimulus.

However, she did not rule out the possibility of BI to raise the BI rate in the second half of 2014.

The board of governors of Bank Indonesia is expected to announce the decision on the BI rate on Thursday.

In its previous monthly meeting, the board of governors decided to maintain the 7.5 percent rate.

Earlier, Enny, an observer from the Institute for Development of Economy and Finance (INDEF) pointed out that the BI rate is already a bit too high.

Enny added that there was no reason for BI to continue the policy of high interest rate in its bid to prop up the rupiah and to deal with the current account deficit.

She noted that the rupiah has regained its strength against the U.S. dollar and the pressure is easing on the currency allowing a cut to the BI rate.


Editor: Ella Syafputri
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