Posts Tagged ‘Inflation’

Indonesia’s interest rate anomaly?

Saturday, July 14th, 2007

“…[there is] an anomaly between the BI benchmark rate and bank deposit interest rates in Indonesia at present,” the central bank governor [Burhanudin Abdullah] told the House of Representatives Financial Commission at a hearing which began Thursday evening and lasted Friday.

He said the anomaly lay in the fact that the BI rate (8.25 percent) was higher than the bank deposit rate of 5 percent.

“The BI benchmark rate should have been lower than the bank deposit interest rate,” he added.

He may can call it an anomaly, but the higher Bank Indonesia benchmark rate is central bank’s own policy choice.

It is the consequence of central bank’s obsession to lower inflation rate by setting excessively high interest rate.

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Boediono, the optimist

Wednesday, March 28th, 2007

And it is a good thing too. He used to be, I think, very conservative. All he always talked about was macroeconomic stability. His mantra was low inflation and balanced budget. Only recently he starts putting more attention to unemployment, Indonesia’s most depressing economic problem.

Jakarta Post reports:

The government sees economic growth of 6.8 percent in 2008, with inflation between 5.6 and 6 percent, the coordinating minister for the economy [Boediono] said Monday…

Boediono said the economy has improved since the second and third quarters of last year, and the government had put into place policies to further push the economy.

With more relaxed monetary policies, effective fiscal management and an improved investment climate, he said the growth target could be achieved.

“We have to be optimistic. There’s no reason to be pessimistic,” he said.

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