Indonesia's Central Bank Maintains Interest Rate (BI Rate) at 7.50%

In 2013, Indonesia's inflation rate accelerated to 8.38 percent (yoy) after the government increased prices of subsidized fuels in June 2013. Since September, however, the pace of inflation has been under control and is expected to be back at a normal level in the second or third quarter of 2014 (about 4.5 percent yoy).

2013	Inflation
January	1.03%
February	0.75%
March	0.63%
April	-0.10%
May	-0.03%
June	1.03%
July	3.29%
August	1.12%
September	-0.35%
October	0.09%
November	0.12%
December	0.55%
Total	8.38%

	2008	2009	2010	2011	2012	2013
Inflation (annual percent change)	9.8	4.8	5.1	5.4	4.3	8.4

^{Source: Statistics Indonesia}

The Indonesia rupiah exchange rate, however, remains troublesome and various analysts suggested that the central bank would raise the BI rate today in order to support the rupiah. After speculation emerged in May 2013 about an end of the Federal Reserve's quantitative easing program, capital outflow from Southeast Asia's largest economy quickly occurred, pushing the rupiah to a five-year low. It is still possible that Bank Indonesia will raise the BI rate once the Federal Reserve starts its tapering as an attempt to avert impact on the rupiah.

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