[Kabar-indonesia] 4 updates: BI Cuts Key Rate By 50 bps [+Bloomberg; Boediono: "Very Good"]

[JoyoNews at aol.com]

also: Bloomberg: Southeast Asia Central Banks Seeking Lower Rates to Spur 
Growth; Indonesia econ min says rate cut move "very good;" and Indonesia 
c.bank sees room for further rate cuts

Indonesia central bank cuts key rate by 50 bps

JAKARTA, Aug 8 (Reuters) - Indonesia cut its key interest rate by a half a 
percentage point to 11.75 percent on Tuesday, the third reduction this year, 
after annual inflation fell to a 10-month low.

Ten of 18 analysts polled by Reuters last week had expected a 50 basis-point 
cut 
in the BI target rate, while eight had seen a 25 basis-point reduction to try 
to boost an economy feeling the pinch of high borrowing costs and inflation.

Expectations for a rate cut were also raised by comments from central bank 
officials, most lately Deputy Governor Miranda Goeltom, that "aggressive" 
monetary easing was possible.

"The decision was made taking into consideration the improving macroeconomic 
conditions, easing of external risks, results of many surveys as well as the 
economic and monetary prospects," the bank said in a statement.

Analysts said the 50 basis point rate cut would boost the economy, but would 
not have a significant immediate impact.

"A 50 basis point cut is likely to bolster the economy, although it is 
unlikely to have any immediate significant economic impact," said economist Helmi 
Arman of Bahana Sekuritas.

"Given poor sales of goods such as cement and cars, aggressive rate cuts are 
needed. Such cuts will likely have a significant impact once rates approach 10 
percent."

The central bank raised the BI rate to 12.75 percent from 8.5 percent in the 
second half of last year to support an ailing rupiah <IDR=> and after 
inflation shot up following a sharp rise in domestic fuel prices in October.

But after hitting a six-year high in November at more than 18 percent, the 
annual inflation rate eased to reach 15.15 percent in July, its lowest since 
last September.

The rupiah was quoted at 9,075 per dollar after the rate decision, largely 
unchanged from 9,080 beforehand. The main Jakarta index was down 0.2 percent 
when it closed for a mid-day break. The rate move was announced during the break.

The central bank has said it expects annual inflation to fall to around 8 
percent by the end of 2006, which opens the possibility for the BI rate to fall 
to around 11 percent, largely in line with market forecasts.

The rupiah fell to a four-year low last August as investors worried high 
world oil prices would hit Indonesia's economy hard.

In response, the government more than doubled domestic fuel prices on Oct. 1, 
but that fired-up inflation forcing the central bank to boost interest rates.

High credit costs and inflation took a toll on the economy.

Gross domestic product grew in the first quarter by 4.6 percent from a year 
earlier, its weakest annual pace since the second quarter of 2004.

In a revised budget proposal, the government has projected economic growth 
this year of 5.9 percent, down from 6.2 percent originally, but still higher 
than last year's growth of 5.6 percent. 

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Southeast Asia Central Banks Seeking Lower Rates to Spur Growth 

by Arijit Ghosh in Jakarta 

Aug. 8 (Bloomberg) -- Indonesia cut its benchmark interest rate and 
Thailand's central bank governor said he's finished increasing borrowing costs as 
policymakers in Southeast Asia seek to spur economic growth after inflation cooled. 

The Philippines will probably keep interest rates unchanged for a 10th month 
tomorrow and Malaysia stopped raising the cost of credit in June. In the U.S., 
Southeast Asia's biggest export market, the Federal Reserve is expected to 
keep its target rate on hold later today, according to a Bloomberg News survey. 

Southeast Asian nations including Indonesia, Thailand and the Philippines are 
cutting interest rates or putting borrowing costs on hold amid signs of 
slowing economic growth. Central banks in the region have been aided by easing 
inflation, which in July dropped to a 10-month low in Indonesia and the lowest in 
a year in Thailand. 

``A lot of the Asian central banks are done raising rates,'' said Shane 
Oliver, chief economist at AMP Capital Investors in Sydney. ``Beyond oil, inflation 
hasn't been a major problem, and in some parts of Asia growth has come off a 
bit, so the need to keep jacking up interest rates has faded.'' 

Bank Indonesia Governor Burhanuddin Abdullah reduced the rate used as a 
reference for bill sales to 11.75 percent, the central bank said in a statement in 
Jakarta today. The move was predicted by 11 of 19 economists surveyed by 
Bloomberg News. 

Indonesia's central bank has reduced its benchmark rate at three of its past 
four meetings, having previously cut borrowing costs by a quarter point on 
July 6 and May 9, to spur an economy where the World Bank expects growth may slow 
this year for the first time since 2001. 

Thailand, Malaysia 

The Bank of Thailand will probably keep its key interest rate on hold for the 
rest of the year after borrowing costs quadrupled since August 2004, central 
bank Governor Pridiyathorn Devakula in an Aug. 7 interview in Bangkok. 

``Enough is enough,'' said Pridiyathorn. ``We see no need to push further 
with interest rates. That should be enough for this year, if there's not another 
round of oil increases.'' 

Thailand's central bank stopped raising interest rates in July for the first 
time in 10 meetings. Pridiyathorn said the rate of inflation will probably 
stall in the second half of 2006 after consumer prices rose at the slowest pace 
in a year in July. 

Malaysia stopped increasing borrowing costs in June and the Philippines will 
probably keep its benchmark interest rate unchanged for a 10th month at a 
meeting tomorrow. 

Fuel Prices 

``Thailand and Malaysia are expecting growth to slow,'' said Tom Taylor, head 
of international economics at National Australia Bank Ltd. in Melbourne. 
``They'd like not to do anymore rate increases, but whether they can get away with 
that will depend on what oil prices do to inflation.'' 

Lower borrowing costs may encourage Indonesians to spend more after a 
doubling of fuel prices and a surge in interest rates last year crimped sales at 
companies such as the local unit of Toyota Motor Corp. Abdullah and his fellow 
policy makers will probably continue to cut the cost of credit this year to boost 
consumption and growth, economists said. 

``We aren't going to see flashy growth this year,'' said Lim Su Sian, an 
economist at DBS Group Holdings Ltd. Once Bank Indonesia starts cutting by a half 
point, ``they should keep going until they hit 10 percent. There will be some 
lag before lower interest rates take affect.'' 

Higher borrowing costs led to a 49 percent decline in car sales in Indonesia 
in the first half of the year. The nation's combined vehicle sales probably 
fell 56 percent to 21,500 units last month, Jodjana Jody, head of sales 
according to PT Toyota- Astra Motor, said yesterday. 

Car Sales 

Toyota-Astra alone sold 7,645 units in July, or down 52 percent from 15,920 
units last year, Jody said. Motorcycle sales in July probably fell 20 percent, 
the eighth straight month of decline, according to PT Astra Honda Motor. 

Indonesia's government expects the $276 billion economy to expand 5.9 percent 
this year after growing 5.6 percent in 2005, as the government boosts 
spending on social work projects and the central bank cuts rates. 

``It will be hard to achieve the government's goal,'' said Winang Budoyo, an 
economist at PT Bank Lippo. ``Consumption will only rebound in the fourth 
quarter.'' 

Growth in Thailand's $1.69 billion economy, Southeast Asia's second-largest, 
may slow to as little as 3 percent in the second half of 2006, from 5.4 
percent in the first half, Pridiyathorn said on Aug. 3. Oil prices and delays in 
forming a new government in Thailand have stunted both state and private 
investment, he said yesterday. 

Consumer spending accounts for about half of gross domestic product in 
Thailand. Investments by private companies make up of about a fourth. The rest is 
government spending and net exports. 

Thailand has been ruled by a caretaker government that hasn't been able to 
enact new policies since Prime Minister Thaksin Shinawatra dissolved parliament 
in February, calling a snap vote in an attempt to end street protests and 
silence critics. The April 2 election was boycotted and later nullified by a 
court. Elections are scheduled to be held Oct. 15. 

--------------------------------------------

Indonesia econ min says rate cut move "very good"

JAKARTA, Aug 8 (Reuters) - Indonesian chief economics minister 
Boediono said a decision by the central bank's board of governors 
on Tuesday to cut the benchmark interest rate by 50 basis points 
to 11.75 percent is a "very good" move. -end-

---------------------------------

Indonesia c.bank sees room for further rate cuts

JAKARTA, Aug 8 (Reuters) - Indonesia's central bank sees room 
for more interest rate cuts later this year, the bank's chief spokesman, 
Budi Mulya, told reporters on Tuesday.

The bank cut its benchmark interest rate by 50 basis points to 11.75 
percent on Tuesday after an easing in inflation. -end-

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Joyo Indonesia News Service
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