Bloomberg News

Indonesia’s Nasution Says Inflation Isn’t Current Challenge

October 14, 2011

(Updates with rate cut in third paragraph.)

Oct. 14 (Bloomberg) -- Bank Indonesia Governor Darmin Nasution said inflation isn’t his country’s primary challenge at a time when the global economy is slowing.

“Inflation is no longer the No. 1 challenge,” Nasution told reporters in Paris today. “When the economy slows down, prices should go down.” Interest rates are at a “proper” level after a recent cut, he added.

Indonesia’s central bank unexpectedly cut its benchmark interest rate on Oct. 11 for the first time in more than two years, lowering the reference rate by a quarter of a percentage point to 6.5 percent. Emerging-market nations have boosted measures to drive growth as a struggling U.S. recovery and deepening European crisis threaten the global economy, with Brazil, Turkey, Russia and Pakistan cutting borrowing costs.

Indonesia is preparing a stimulus package that it may implement in the first half of 2012 if needed, the government said last month. It agreed to maintain subsidized fuel prices for 2012 at this year’s level, Melchias Mekeng, head of the parliament’s budget committee, said this week.

Consumer prices in Indonesia, Southeast’s Asia largest economy rose 4.61 percent in September from a year earlier, after climbing 4.79 percent in August. The inflation rate may be less than 5 percent this year and next, Perry Warjiyo, Bank Indonesia’s director of economic research, said this week.

Nasution also said that the Group of 20 still requires “a long discussion” on reform of the global monetary system.

--With assistance from Novrida Manurung in Jakarta. Editors: Stephanie Phang, Greg Ahlstrand

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editors responsible for this story: Svenja O’Donnell at sodonnell@bloomberg.net; Stephanie Phang at sphang@bloomberg.net


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