[Kabar-indonesia] BI Will Maintain "Gradual" Benchmark Rate Cuts

[Joyo at aol.com]

Bk Indonesia: Will Maintain "Gradual" Benchmark Rate Cuts

JAKARTA, November 2 (Dow Jones)--Indonesia's economy is on
track to expand 5.5%-5.6% in 2006, Bank Indonesia Deputy
Governor Hartadi Sarwono said Thursday.

That growth will be built on likely growth in gross domestic
product of around 5.4% in the third quarter of 2006, Sarwono
told reporters. [ 02-11-06 0705GMT ]

Sarwono's full-year gross domestic product growth projection
is below an official government forecast of 5.8% for this
year, compared with the 5.6% expansion last year.

The deputy governor's forecast for 2006 GDP growth follows
forecasts for economic growth "of at least 5.6%" in recent
days by senior government ministers and President Susilo
Bambang Yudhoyono.

Those comments suggest that the government is subtly
backpedaling from its official 2006 GDP forecast of 5.8% and
preparing the public for full-year economic growth that will
be flat or only marginally higher than the 2005 result.

However, despite the limp outlook for economic growth,
Sarwono said that Indonesia's economic recovery "appears to
be gaining momentum" on the back of rising consumption and
exports in the third quarter.

Sarwono indicated that ongoing monetary policy loosening
will continue.

"The central bank's intention is basically to maintain a
gradual pace of interest rate reduction, providing
inflationary pressure continues to ease," he said, without
providing specific projections.

Inflation in Indonesia "remains subdued," Sarwono said.

Indonesia's on-year inflation fell to 6.29% in October from
14.55% in September on the back of a high base effect
created by the government's move to effectively more-than-
double fuel prices in October 2005.

The benchmark Bank Indonesia rate, now at 10.75%, will
likely fall to 9.0%-9.5% by the end of 2006 in tandem with a
decline in on-year inflation to 7.00%-8.0% in the same
period, Bank Indonesia Deputy Governor Aslim Tadjuddin said
last month.

Bank Indonesia's Board of Governors will decide on possible
adjustments to the benchmark rate at a regular monthly
meeting on Tuesday. Analysts expect the rate to fall 25-75
basis points.

Sarwono projected that Indonesia's foreign exchange reserves
would hit $47 billion by the end of 2007.

That figure was equivalent to "5.4 months of foreign debt
repayments," he said.

Reserves were $42.36 billion at the end of September,
according to the most recent official data.

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Joyo Indonesia News Service
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