TEXT-Indonesia c.bank raises reference rate to 7.25 pct
JAKARTA, Sept 12
JAKARTA, Sept 12 (Reuters) - Indonesia's central bank raised both its benchmark reference rates, the deposit facility rate and the lending facility rate by 25 basis points on Thursday, in a bid to manage inflation, stabilise the rupiah and ensure the current account deficit at a sustainable level.
The following is the text of Bank Indonesia's monetary policy statement, translated by Reuters:
"The meeting of Bank Indonesia's board of governors on September 12, 2013, decided to raise the BI rate by 25 bps to 7.25 percent, the interest rate for the Lending Facility by 25 bps to 7.25 percent and the Deposit Facility interest rate by 25 bps to 5.5 percent.
"The interest rate hikes are further measures to strengthen Bank Indonesia's policy mix which is focused on managing inflation, stabilising the rupiah exchange rate, as well as ensuring the adjustment of the current account deficit is at a sustainable level.
"Measures to stabilise the rupiah exchange rate are in line with the fundamental situation and will continue to be done, supported by measures to strengthen monetary policy and deepen forex markets. Bank Indonesia will continue to strengthen coordination with the government and FKSSK to maintain macroeconomic stability and the nation's financial system, particularly in managing inflation, financial market stability, as well as lowering the current account deficit and the health of balance of payments.
"Bank Indonesia sees that those measures together with various measures taken previously will expedite the adjustment of the current account deficit and managing inflation towards a target of 4.5 percent plus/minus 1 percent in 2014.
"Bank Indonesia sees that global economic slowdown and uncertainty in global financial markets will continue going forward.
"...the uncertainty related to tapering of monetary stimulus by the Fed and potential shifting in direction of the global economy will be continuously monitored.
"Bank Indonesia revises down the estimate of Indonesia's economic growth in 2013 to 5.5-5.9 percent from an initial 5.8-6.2 percent. On the domestic side, the economic slowdown is evident from various surveys conducted by Bank Indonesia, such as the retail sales survey and consumer confidence survey that are indicating that household consumption tends to slow in the second half of 2013. Various investment indicators such as capital goods imports, sales of heavy equipment, and electricity consumption for the manufacturing industry have been confirming that non-construction investment is expected to contract in the second half of 2013.
"On the external side, real exports are expected to improve amid Indonesia's weaker export commodities prices. Going forward, in line with prospects for the global economy which are not as strong as expected, Bank Indonesia also revised the projection for economic growth in 2014 to 5.8-6.2 percent from the previous 6.0-6.4 percent.
"The balance of payments is expected to improve. The estimate would be influenced by a narrow oil and gas trade deficit, after posting a wide deficit in July 2013 due to high oil and gas imports to add cushion in anticipating Eid al-Fitr.
"The decline in the current account deficit would also be affected by weaker domestic demand and various policies to lower imports.
"Bank Indonesia also sees that the condition of private external debt remains quite healthy, supported by long tenor debt composition and is dominated by export-oriented firms.
"The exchange rate of the rupiah is gradually stabilising and the interbank forex market has turned active. Today, the rupiah exchange rate continues to show an appreciation trend. Bank Indonesia sees the development of the rupiah exchange rate staying consistent with the fundamental situation, as well as supporting increased exports and lower imports in the adjustment process of the current account deficit.
"Inflationary expectations eased in August 2013, after posting quite high inflation in July 2013. Bank Indonesia expects inflationary pressures going forward will continue to ease, with inflation in September expected at a very low level. The prospect of easing inflationary pressure would also be influenced by the impact of slower domestic demand as well as actions to strengthening policy coordination between Bank Indonesia and the government. With this progress, inflation in 2013 is expected to be around 9.0-9.8 percent and easing to around 4.5 percent plus or minus 1 percent in 2014.
"The stability of the financial system is well manageable, supported by maintained resilience of the banking industry. Amid the economic slowdown trend and depreciation in the rupiah, the resilience of the banking industry remained solid reflected by high capital adequacy ratio at 18 percent and well above the minimum provision of 8 percent, and low non performing loans at 1.9 percent in July 2013.
"Meanwhile, loan growth grew quite high in July by 22.3 percent (yoy), and will go down to 22.0 percent (yoy) in August 2013. In addition to base effects, the loan growth is the realisation of existing commitment. Bank Indonesia will continue its supervisory action so that economic growth is in line with economic development and is able to support the stability of the banking industry and financial system.
For a story on the rate moves and economists' reaction, see (Reporting by Rieka Rahadiana; Editing by Jacqueline Wong)
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