Thursday, February 5, 2009

Cheap money! Rates cut again

Welcome, Indonesia, to the brethren of panicked central banks. Monetary-policy wonks around the globe are slashing interest rates as fast as they can, to keep just ahead of the brutal recession that's already hit most nations.

Indonesia's the latest contestant, cutting rates another half-point to 8.25%. Granted, still relatively high, compared to America which has already cut rates to near-zero in an effort to stimulate a dead economy. But the Indonesian central bank in particular is between a rock and a hard place, having to simultaneously support the feeble rupiah, which is (like most emerging-market currencies) abandonded by investors in times of financial turmoil.

Let's hope that this policy of cheaper money jumpstarts more lending and investment. But beware the beast looming on the horizon: Inflation, which can be just as traumatic to populations (if not more) than steep stock-market losses. At some point central banks will have to hike interest rates in a hurry, to protect their devalued currencies. The U.S. in particular, to prevent the Chinese from fleeing Treasury bonds and thereby creating a run on the dollar.


Today's Top Stories

Missing hikers found alive
Seven students rescued from Java's Mt. Halimun

And pastries for all ...
Indonesian foundation funds Gaza bakery

Divorces up tenfold
One reason: Political differences?!

Shhh ... VP Jusuf Kalla meeting US intelligence director
Secret meeting not so secret

4 comments:

schmerly said...

Its not political, it's just that the women are sick of being treated like shit! good on 'em.

Brett said...

Maybe I'm naive, but has cutting rates EVER really had an impact? If an economy is broken, cutting rates wont fix it...

PS my word verification below this was "ting(g)i". Cute!

Christopher Taylor said...

In Japan they cut rates to zero for years, and it still didn't do much to help ...

One Simple Tech said...

Terima kasih atas informasinya semoga bermanfaat bagi semua traders di Indonesia.