Indonesia Holds Key Interest Rate to Curb Current-Account Gap

Indonesia’s central bank held its key interest rate for an eighth straight meeting, maintaining a tight policy setting to help narrow a current-account deficit that has depressed the rupiah.

Bank Indonesia Governor Agus Martowardojo and his board maintained the reference rate at 7.5 percent, the central bank said in Jakarta today, a decision predicted by all 21 economists surveyed by Bloomberg News.

The monetary authority has signaled it will maintain a tight monetary stance this year after raising the benchmark rate in 2013, even as inflation eased to a one-year low in June. It refrained from adjusting policy a day after Indonesia’s presidential election, with both Jakarta Governor Joko Widodo and ex-general Prabowo Subianto claiming victory ahead of official results due later this month.

“The election won’t have affected the BI’s decision,” Damhuri Nasution, a Jakarta-based economist at PT Danareksa Sekuritas, said before the decision. “Its policy is to focus on curbing the current-account deficit and inflation.”

Consumer prices gained 6.7 percent from a year earlier in June, slowing from 7.32 percent the previous month. Policy makers aim to narrow the current-account deficit to 2.5 percent of gross domestic product by the end of this year from 3.3 percent in 2013.

To contact the reporters on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net; Herdaru Purnomo in Jakarta at hpurnomo1@bloomberg.net

To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net Malcolm Scott, Rina Chandran

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