(MENAFNEditorial)
JAKARTA February 10 2015 – The pressures for Bank Indonesia (BI) to cut the interest rate is strengthening in line with the disinflation of the global monetary easing trend which spurs interest rate war as well as the growth below expectation.
Amid the projections on the Asia’s central banks action which would be more dovish this year Indonesia also grabs the attention. BI is predicted to lower the interest rate by 50 basis points into 7.25% this year according to the economic research team Credit Suisse a finance institution with the basis in Switzerland.
First the disinflation in many countries may grow stronger than the projections by the analysts and central banks from falling oil prices. Second the economy in most countries would have improvements in current account which reduces the liquidity dry-up risk to dollar.
Third the monetary stimulus in large numbers as made by the European Central Bank (ECB) would reduce the capital outflow risk in short term that may provide room for the interest rate cut in Asia including Indonesia.
The Economist of Credit Suisse Santitam Sathirathai in his research report entitled When Monetary Doves Meet Fiscal Hawks notices that Indonesia might lower the interest rate although most analysts predict that the BI rate would stay at 7.75% or higher to control the inflation and rupiah exchange rate.
However he said the change of fuel price policy that tends to follow the market mechanism leads the inflation to a lower level this year. The inflation in Indonesia may reach 5.9% this year much lower than the consensus at 6.6%.
He believed that BI would be more tolerant to the exchange rate depreciation for it may propel the export and hold the import at the same time. Moreover with the fuel subsidy liberalization the State Budget (APBN) would be no longer sensitive to the rupiah movement and oil prices. “BI would cut by 50 basis points at end of this year” he said. Read more…
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