Indonesia cuts BI rate by 25 bps to 6½% on subdued inflation forecast

By Susanna Moon

Chicago, Oct. 12 - Bank Indonesia's Board of Governors said it decided to lower the BI rate by 25 basis points to 6½% at its meeting on Tuesday.

The decision is based on the belief that the inflation rate will be below 5% this year and in 2012 as well, according to a bank news release.

Consumer Price Index inflation in the third quarter was recorded at 1.89% quarter-over-quarter, or 4.61% year-over-year, down from the third quarter of the previous year, the bank said.

Meanwhile, pressure on core inflation, aside from rising gold prices, is also manageable due to the exchange rate appreciation policy in the previous period and adequate supply in responding to demand, the bank said.

The board decided to keep the BI rate unchanged at 6¾% at its meeting on Sept. 8.

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