BI Rate to Endure Future Fuel Price Rise

BI will in the short run shape up the monetary operations in controlling liquidity. 

Bank Indonesia (BI) predicted that if the benchmark interest rate (BI rate) is at around 5.7%, it would still be capable of withholding inflation which may be a result of the rise in subsidized fuel price. 

“We are improving monetary operations. Due to the short-term inflation pressure, we are performing a simulation on whether or not BI Rate can withhold the expected fuel price rise. The simulation proves the BI Rate can endure at the level of 5.75%,” Director of BI’s Economic Research & Monetary Policy Directorate, Pery Warjiyo, told VIVAnewson Tuesday.

Pery figured the BI Rate would be unharmed over future inflation fundamental provided the solid economic outlook of 2012-2013.

“With the economic forecast in 2012-2013, the BI Rate is still in agreement with the future inflation fundamental,” he said.

The central bank will in the short run shape up the monetary operations in controlling liquidity.

However, Pery said that with the strengthening of monetary operations, the monetary interest rate and stock market interest rate will rise slightly, especially for one day tenure.

“As an illustration, if the overnight interest rate of monetary operation in early march was 3.75%, then the tenure of nine months would be almost 3.8% flat. With last month’s monetary operations, the overnight deposit monetary interest rate stays at 3.75%, but the 9 months’ tenure would be 4%,” explained Pery.


Source : VIVAnews