Indonesia holds interest rate steady at 7.5%

Indonesia's central bank on Thursday kept its benchmark interest rate unchanged at 7.5 percent for a fourth consecutive month despite trade deficit in January, as inflation has been cooled and the local currency has appreciated markedly this year, the bank said in a statement. The bank also held the overnight lending rate at 7.5 percent and deposit rate at 5.75 percent. "The decision remain consistent with the tight monetary policy, which is aimed at keeping inflation at 3.5 percent to 5.5 percent in 2014 and 3 percent to 5 percent in 2015, and controlling current account deficit at lower level," the bank said. The largest economy in Southeast Asia chalked up a record 1.52- billion-U.S.-dollar trade surplus in December last year before the trade balance swung to a deficit of 430.6 million U.S. dollars in January, due to huge deficit stemming from oil import and a broad ban on mineral ores export since Jan. 12. There was a 2.04-billion-U.S.-dollar deficit from oil derivative products trade in January, according to the national statistics bureau. Meanwhile, a government ban on mineral ore shipment overseas imposed on Jan. 12 resulted in a 70.13 percent month-on-month decrease in export revenue, which stood at 291.8 million U.S. dollars in the month. Energy and Mines Minister Jero Wacik said earlier that the ministry revised downward government projection on revenue loss from the ban on minerals export to 4 billion U.S. dollars this year, from the initial forecast of 5 billion U.S. dollars, as the Trade Ministry has given permits to export of processed mineral ores to more than 19 mining firms and may issue more permits. Despite the trade deficit in January and the export ban on mineral ores, the country's rupiah has continued strengthening against the U.S. dollar. On Thursday, rupiah was traded at 11,387 against the greenback, compared with a level of above 12,000 in 2013, when capital flew out of the country partly on concerns over U.S. Fed's tapering policy. The central bank's move to raise the base rate by 1.75 percentage points between June and November has helped Indonesia fare better than other emerging markets battered by capital outflows. Indonesia's consumer prices index eased to 7.75 percent in February on a yearly basis, from 8.22 percent in January, the statistic bureau has said. Core inflation, excluding volatile prices for items such as food and government-regulated prices for products including fuel, was chalked up higher at 4.57 percent in February, up from 4.53 percent in January. The Indonesian economy is projected to grow at a slower pace of 5.5 percent this year, compared to 5.8 percent last year, due to the weak global economy, Finance Minister Chatib Basri has said.