Business life: My finance news blog

Indonesia's central bank will probably refrain from raising its benchmark interest rate as it seeks to balance the risk of slowing growth with inflation at an 18-month high.

Governor Burhanuddin Abdullah and his colleagues will maintain the rate used as a reference for bill sales at 8 percent for a fourth month, according to all nine economists surveyed by Bloomberg News. The decision is due in Jakarta tomorrow.

Bank Indonesia, faced with prospects of a slowing economy, may keep borrowing costs at a three-year low even as inflation accelerates. The World Bank yesterday cut its 2008 growth estimate for Southeast Asia's biggest economy to 6 percent from its previous forecast of 6.4 percent on concern higher prices will slow consumption. Indonesia's gross domestic product expanded 6.3 percent last year.

“Bank Indonesia will have to deliver very clear explanations why it won't'' raise rates, Michael Spencer, chief economist for Asia at Deutsche Bank AG in Hong Kong, said in a note to clients yesterday. “Our call remains for a tightening of policy in the second half of the year.''

Consumer prices increased 8.2 percent in March from a year earlier, the Central Statistics Bureau said yesterday, the fastest pace in 18 months 500 fast cash payday loans. The inflation rate is faster than the central bank's policy rate of 8 percent.

Food prices in Asia's third-most populated nation increased 13.6 percent last month, the fastest pace in Southeast Asia outside Vietnam.

The central bank may also be forced to raise interest rates as the rupiah weakens, said Michael Buchanan, an economist with Goldman Sachs Group Inc. The currency has declined 1.7 percent in the past month.

“The government is losing the battle to achieve its dual goals of keeping inflation low while sustaining economic growth,'' Kenny Soejatman, Jakarta-based head of research at ABN Amro Holdings NV, said in a note to clients. Increasing interest rates will “help Indonesia relieve pressure on the rupiah.''

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