BI to stick to data in deciding any rate cuts

Jakarta

BANK Indonesia would consider loosening monetary policy if inflation and the current account deficit were under control, a view "in line" with recent government comments that the country should cut rates gradually, said Peter Jacobs, a director at the central bank.

The authority will be data dependent in its decisions, Mr Jacobs said in an interview on Tuesday. President Joko Widodo and vice-president Jusuf Kalla met governor Agus Martowardojo last week and didn't ask for a cut, and there was no clash over rates, he said.

The central bank, due to release its policy decision on May 19, is balancing pressure to support the economy against efforts to curb inflation and a persistent current account shortfall that has helped make the rupiah Asia's worst performing currency this year. Mr Kalla said last week that rates will be gradually cut, while Mr Martowardojo said he will maintain a tight monetary stance.

"If the government says this is the time for us to lower the rate, if we then lower the rate, that's not intervention by the government but data dependent policy," said Mr Jacobs. "Based on the data, we would make the decision. In line with that, what Pak Jusuf Kalla is saying is in line with our thinking."

Mr Martowardojo talked about inflation in his meetings with the leaders and said the economy could be spurred by government investment, Mr Jacobs said. Gross domestic product expanded 4.7 per cent from a year earlier last quarter, the slowest pace in more than five years, as state spending slowed.

The central bank has its inflation target set by the government, yet it is "instrument independent" in how it reaches that goal, Mr Jacobs said. BLOOMBERG