The Indonesian central bank on Thursday held its benchmark interest rate unchanged amid weakening rupiah and rising inflation pressure.
The governor board meeting decided to keep the basic rate at 7. 50 percent for the fourth straight meeting.
The meeting also kept its overnight deposit and lending facilities at 5.50 and 8.00 percent respectively.
Rupiah has depreciated by over 7 percent since the beginning of this year and was traded at 13,341 per one U.S. dollar on Thursday and annual inflation reached 7.15 percent in May, still exceeding the lender target of 4 to 5 percent this year.
"Now, the currency matter is at peak. Now is not the right time for the rate cut," Martin Pangabean, chief economist of Indonesia Green Investment Collectives (IGIco) Advisory, told Xinhua before the announcement.
Though pressure to accelerate economic growth hikes, the chief economist said that cutting rate would be risky and supported the central bank's steps to take macro-prudential policies to help spur growth, such as easing down payment for automotive and housing credits and planning to trim credit rate for some small businesses. "If the rate is cut, the currency will be weakened sharply and inflation will accelerate faster. It is dangerous. The economic growth will be disturbed. It is better to do it (macro-prudential policy) first, and then see whether it is effective or not," said Martin.
Indonesia's economic slowdown reached 4.71 percent at the first quarter, the lowest in five years. "The central bank balances between inflation and growth, but now, should the rate be forced to be cut, the rupiah will fall sharply, it is not good for growth," Wisnu Wardana, economic analyst from CIMB Niaga bank said.
original source: http://www.globalpost.com/article/6586450/2015/06/18/indonesian-central-bank-keeps-rate-unchanged-rupiah-weakens