BI Expected To Keep Its Key Rate Unchanged In 2012

Jakarta (Antara Bali) - Bank Indonesia (the central bank/BI) is expected to keep its benchmark interest rate unchanged at 6 percent next year although the country will receive an investment grade, a banking observer said.

The investment grade would encourage more foreign investment inflows and therefore, the national economy would grow more highly, Roy Arfandy said here on Sunday.

The country's market prospects would remain promising along with strong investment inflows in 2012, he said.

"We are optimistic that foreign investment inflows will continue to increase if the government provides better incentives to foreign investors so they will feel comfortable in doing business in the country," he said.

He said the key rate of 6 percent was relatively low because the operating cost in the country was high.

If the key rate locally known as BI Rate was to be lowered again banks' net interest income would decline accordingly, he said.

Asked about the US and European sovereign debt crises, he said the crises would more or less have an impact on the Indonesian economy. However, the domestic economy would continue to grow, fueled by strong consumption and investment.

The decline in share composite index and the rupiah's depreciation against the dollar would be temporary and they would rebound, he said.

This was because foreign investors preferred holding the dollar to the rupiah, thus causing the local unit to plunge to a level of Rp9,250 per dollar, he said.(*)