Macroeconomic and Financial System Stability Firm : BI Rate Unchanged at 8.25%
The Board of Governors’ Meeting at Bank Indonesia at November 6, 2007 decided to keep the BI Rate steady at 8.25%. The decision is based on a comprehensive discussion and evaluation of economic projections and developments, the outlook for achievement of the inflation target for 2007 and 2008 and identification of risks.
Bank Indonesia is also keeping a close watch on current developments with particular focus on escalating world oil prices and the continuing fallout from the subprime mortgage crisis in the United States, while also assessing the impact of these events on the national economy. According to this assessment, the current escalation in oil prices is expected to have only limited impact on ecomomic expansion and inflation. With Indonesia’s growing economic resilience, the processes for strengthening economic growth are expected to remain stable and on track.
Inflation at end-2007 is predicted to remain within the original 6%±1% targeted range. Concerning 2008, Bank Indonesia sees the potential for increased risk in some areas that could exacerbate future inflationary pressures.
Some factor were considered in Bank Indonesia decision such as the rising trend in world oil prices and the associated potential for price increases across a wide range of commodities, including CPO, rubber and other non-oil and gas agricultural exports; the ongoing turmoil in global financial markets brought about by the subprime mortage cdrisis; and steadily mounting public expectations of future inflation.
In general, the Indonesian economy remains on track with earlier forecasts. During Q3/2007, economic growth reached an estimated 6.3% on the strength of higher consumption and exports. The balance of payments in Q3/2007 again recorded an estimated surplus, although more modest than the surplus of Q2/2007.