Indonesia Economic Outlook (2-revised): BI Rate 4-6%

This is a revised version compared to the previous version. It dues to the different rate. I predicted the rate would go in a range of 6-8% mostly because the Central Bank may play hard on the rate. I believe that the Central Bank would stick to its Inflation Targeting Program. However, I had reviewed the last action by the Central Bank which do not relate anymore with its Inflation Targeting. This shows that the Central Bank would cut the rate further in the next 11 months and put the Inflation Targeting aside.

Therefore, I predict the rate will go as far as 6% by the end of the year if business runs as predicted. It is predicted that business will be normal at the last quarter of 2009. This would only affect the rate if by November 2009 prices  or price indexs won’t increase. This prediction connects to my previous prediction on the inflation in a range of 2-4%. If we use the normal spread between inflation and rate of 2%, the rate by the end of 2009 will be in a range of 4-6%.