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Bank Indonesia says it doesn't have the luxury to go against market

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Indonesia's central bank doesn't have the luxury to go against what is happening in the global financial market, senior deputy governor said, suggesting that Bank Indonesia would keep its policy tight next month.

[JAKARTA] Indonesia's central bank doesn't have the luxury to go against what is happening in the global financial market, senior deputy governor said, suggesting that Bank Indonesia would keep its policy tight next month.

Bank Indonesia kept its key interest rate on hold at 7.50 per cent in the eve of the US Federal Reserve's meeting this month, but analysts have said it has scope to cut sometime this year.

Analysts said the central bank had shifted its "stability over growth" stance when it cut its key interest rate by 25 basis points in February, but had to pause in March after the rupiah weakened to a 17-year low at 13,244 per dollar in March.

The rupiah was traded at 13,070 against the greenback on Monday.

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Bank Indonesia's Senior Deputy Governor Mirza Adityaswara said the central bank is supporting a "pro-growth" stance through stabilization.

"We, emerging markets, don't have the luxury to make a policy that is against what is happening in the global financial market. We are not dollar-printer," Mr Adityaswara said late on Monday. "That's why we will maintain stability to support (economic) growth. If we don't have stability, growth would slow."

At a different location on Monday, Bank Indonesia Governor Agus Martowardojo reiterated that the central bank's policy was still tight-bias.

In the last two years, in which the central bank increased its benchmark rate by 200 basis points, Bank Indonesia said it put stability over economic growth. It repeatedly said the high interest rate was intended to decelerate growth, curb imports and narrow the then wide current account deficit.

Economic growth was 5.02 per cent in 2014, the slowest in five years and loan growth was down at 11.6 per cent, the weakest in almost five years.

Bank Indonesia expected growth to rebound to 5.4 to 5.8 per cent this year, with loan growth at 15 to 17 per cent. But it expected the current account deficit to be maintained at 3 per cent of gross domestic product, or about the same size as last year.

REUTERS

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