household consumption

Indonesia Central Bank News update

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Indonesia holds rate, alert to inflation from fuel price move – Central Bank News.

 Indonesia’s central bank held its benchmark BI rate steady at 5.75 percent, as expected, but said it would not hesitate to adjust its policy stance and was closely monitoring inflationary pressures from rising inflation expectations linked to a possible government decision on oil-based fuels.
    Bank Indonesia (BI), which last cut its rate by 25 basis points in 2012, said it would continue to absorb excess liquidity through longer-term instruments and would shortly publish a reference exchange rate for the rupiah in the domestic spot market to help stabilize the exchange rate.
    Indonesia’s government is considering cutting popular fuel subsidies that is helping widen its budget deficit. The government, which spends more on fuel subsidies than education or health care, will compensate some the poorest people in an attempt to soften the blow of higher fuel prices.
   Indonesia’s headline inflation rate eased in April to 5.57 percent from 5.9 percent, along with core inflation that fell to 4.12 percent in line with lower global commodity food prices, but added that “inflation expectations begin to rise driven by the uncertainty in fuel subsidy policy.”
    Bank Indonesia targets inflation of 4.5 percent, plus/minus one percentage point.
     The central bank, whose governor is leaving later this month to be replaced by former finance minister Agus Martowardojo, said the pressure on the rupiah eased this month in line with higher capital inflows and there was only temporary pressure on the exchange rate following a revision earlier this month of the country’s ratings outlook to stable from positive by Standard and Poor’s.
    The issue of fuel subsidies has made international investors jittery and put pressure on the rupiah’s exchange rate. However, a global bond issue improved capital inflows with international reserves rising to 107.3 billion at the end of April, the equivalent of 5.8 months of imports and external debt service.
     In the first quarter of 2013, Indonesia’s Gross Domestic Product expanded by an annual 6.02 percent, lower than the central bank’s forecast of 6.2 percent, and down from 6.11 percent in the fourth quarter of 2012.
    Bank Indonesia said the slower growth rate was due to declining domestic demand while the recovery in export was still limited.
    “Household consumption growth slowed in line with weakened purchasing power due to higher volatile foods inflation and rising inflation expectations related to uncertainty in fuel subsidy policy,” the central bank said.
    Growth in the second quarter is expected to be lower than previous forecast and around the first quarter rate, BI said, forecasting growth for 2013 in the lower range of 6.2-6.6 percent.
    In 2012 Indonesia’s economy expanded by 6.2 percent.


Colombia Central Bank holds rate steady at 3.25%

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Colombia holds rate steady at 3.25% after seven cuts – Central Bank News.

Colombia’s central bank held its benchmark interest rate steady at 3.25 percent, as expected, saying the economy continues to grow below its potential and inflation is below 3.0 percent but it is “particularly difficult to interpret current trends in economic activity and its projection.”
    But recent rate cuts and proposed fiscal policy measures should help raise economic growth toward the country’s productive capacity and this will help inflation move closer to the central bank’s target.
    “In this context, the balance of risk assessment indicates the need to maintain the policy interest rate at 3.25%, while waiting for more information,” the central bank said.
    The Central Bank of Colombia central bank has cut rates seven times by a total of 200 basis points since July last year, most recently by 50 basis points in March.
    Economic activity in the first quarter of this year has slowed from 2012, the central bank said, with household consumption growing at a slower rate along with a deterioration in industry.
    But the recent behaviour of some components of aggregate spending and fewer working days in the first quarter compared with last year has made it difficult to interpret current trends, the bank said.
    “However, economic growth is expected to increase throughout the year in reaction prior monetary policy actions and programs recently announced by the national government,” the bank said.

    The central bank’s staff forecasts that Colombia’s Gross Domestic Product should expand by 3-5 percent this year, with 4.3 percent the most likely figure, up from 2012’s 4.0 percent last year. In 2011 Colombia’s economy grew by 6.6 percent.
    Colombia’s government has proposed a wide-ranging 5 trillion peso stimulus plan to revive industry and agriculture,  boost housing, reduce energy costs and measures to cut company costs.
     Colombia’s inflation rate accelerated slightly to 1.91 percent in March from a 60-year low of 1.83 percent in February, but still well below the central bank’s target range of 2-4 percent.