Indonesia deems inflation in target range, keeps interest rate at 6½%

By Richard Connell

New York, March 4 - The Board of Governors of Bank Indonesia kept the BI rate at 6½% at its meeting on Thursday, according to a news release issued by the bank.

The board believes the recovery of the domestic economy is ahead of forecasts made earlier in the year, reflected in rising private consumption and higher exports of commodities and manufactured products.

The board also noted an improvement in international investor confidence in Indonesia, resulting in higher capital inflows and capital reserves.

Inflation in February was 0.30% on a month-over-month basis or 3.81% on a year-over-year basis, as inflationary pressures eased with a decline in volatile food prices, most notably rice.

Looking forward, the board forecast no new inflationary pressures for the first half of 2010, with inflation for the whole year remaining within the target range of 5% plus or minus 1%.

The bank has now kept the interest rate unchanged at seven straight meetings.

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