Indonesia keeps rate at 6.5 percent

17:02, November 04, 2010      

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The Indonesian central bank on Thursday kept interest rate on hold at 6.5 percent as the inflation outlook allowed the bank to delay the hike that could trigger more foreign capital inflow, the bank said in a statement.

Indonesia's inflation in October slowed down to 5.67 percent from 5.80 percent in September, according to the Statistic Bureau. The central bank said that the inflation pressure had decreased and forecast the inflation at between 4 and 6 percent this year.

"The decision to hold rate aims at avoiding more capital inflow and spurring growth," said Purbaya Yudhi Sadewa, analyst from Danareksa.

Indonesian President Susilo Bambang Yudhoyono has targeted an average of 6.6 percent annual growth in his remaining term of office ending in 2014.

Indonesian Finance Minister Agus Martowardojo said recently that the 6.5 percent rate was conducive to supporting growth.

The bank has kept the rate unchanged at 6.5 percent since August last year.

The minimum reserve requirement for banks, which has been increased from 5 percent to 8 percent, kicked off on Nov. 1. It is forecast to absorb over 50 trillion rupiah (some 5.61 billion U.S. dollars).

The bank said that the country's foreign exchange reserve rose to 91.799 billion U.S. dollars, equal to 6.93 months' import.



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