Indonesia and Korea keep interest rates on hold as expected

JAKARTA - Bank Indonesia kept its benchmark interest rate unchanged at 7.50% for a second month, with evidence of easing inflation and currency stability enabling the central bank to focus on the growth outlook, which has taken a hit since the middle of last year. Growth is expected to have slowed to 5.6% in 2013 from 6.2% in 2012.

The Bank of Korea (BOK) has also kept its policy rate unchanged, at 2.50% for an eighth straight month (the BOK last cut rates in May 2013). In its policy statement, the BOK continued to express optimism about the growth outlook.
In a separately released updated economic outlook, the BOK projected GDP growth to rise from 2.8% in 2013 to 3.8% and 4.0% in 2014 and 2015 driven by an expected upturn in investment. That said, BBVA Bank says Korea will continue to face growth headwinds from high household debt and increasing competition from Japan as the yen continues to weaken. “Very low inflation (1.2% y/y in December) could provide room for further rate cuts if needed, although they are not currently in our baseline,” the bank says. www.bbvaresearch.com (ATI).