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Sancho Panza

Indonesia Raises Interest Rates To Quell Property Bubble.

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http://www.bloomberg.com/news/2013-07-10/indonesia-plans-policies-to-quell-property-costs-add-dollars.html

'Indonesia, Asia’s first major economy to raise interest rates this year, said it plans to quell rising property prices and address a shortage of dollars, as it seeks to cool inflation and support a weakening rupiah.

Bank Indonesia sees inflation reaching the upper end of its estimated 7.2 percent-to-7.8 percent range for 2013, and will respond if price gains approach such levels, Governor Agus Martowardojo told reporters in Jakarta today, a day before the central bank’s monthly policy meeting.

Bank Indonesia unexpectedly raised its key rate for the first time since 2011 at its June meeting ahead of an increase in subsidized fuel prices. The central bank is forecast to boost the reference rate tomorrow, with 13 of 19 economists surveyed by Bloomberg News predicting a quarter of a percentage point increase to 6.25 percent, three expecting a half-point move and the rest no change.

“We’ll formulate a policy mix as we see that the impact of the fuel price is more than we were expecting,” Martowardojo said, when asked about the July 11 meeting. “We can respond with a property rule and we’ll add forex supply in the market.”

The rupiah was little changed at 9,965 per dollar today, prices compiled by Bloomberg from local banks show. It has fallen more than 5 percent in the past 12 months, the worst performer after the yen and the Indian rupee among 11 Asian currencies tracked by Bloomberg.

Bank Indonesia will keep the rupiah from weakening beyond 10,000 per dollar, Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia (CBA), said in an interview this month.

Indonesia’s inflation quickened to 5.9 percent in June from a year earlier, ahead of the start of the Ramadan festive season, when prices typically rise because of higher spending on food and travel. Food prices rose 10.7 percent while housing costs climbed 4.55 percent in the same period, the statistics bureau said July 1.

Bank Indonesia Deputy Governor Perry Warjiyo said in May the central bank is studying whether to impose stricter loan-to-value rules for mortgages in regions where property demand is expanding too quickly. '

Indonesian government clearly watching developments in Egypt.

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Perhaps it is not the interest rate that is the problem, but the lending criteria on property.

People always blame the European property buble on not being able to control interest rates in individual countries, but there are other ways regulators can control property price inflation.

1, Loan to Value restrictions

2, Income multiple restrictions

3, Order banks to hold more reserves, thus limiting thee amount available to lend.

etc.etc.

Perhaps India has a valid case for raising rates if WAGE INFLATION is at 7.2%, but if the inflation is caused by speculators in London and America artificially driving the price of commodities higher then it will be like pushing on a string.

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People always blame the European property buble on not being able to control interest rates in individual countries, but there are other ways regulators can control property price inflation.

1, Loan to Value restrictions

2, Income multiple restrictions

3, Order banks to hold more reserves, thus limiting thee amount available to lend.

etc.etc.

The trouble is, no one dares to deliberately introduce specific mechanisms to control house prices. Electoral suicide. We have had a bubble here in German brewing for 4 years, and I hate to say it, but it is being celebrated by politicians, as a sign of their own economic brilliance and successful economic policies.

The wonderful thing about being in control of your own interest rates, is that *if* you set them right, then everything works out nicely on its own.

Edited by BigPig

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I suspect there is a huge gap in our knowledge about countries like Indonesia, Malaysia, the Phillipines etc.Is all this stuff important? Who knows?

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I suspect there is a huge gap in our knowledge about countries like Indonesia, Malaysia, the Phillipines etc.Is all this stuff important? Who knows?

I agree.One posts in the hope that someone here does.

Edited by Sancho Panza

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Superb! The Krugmanite bubbles that have been blown up all around the world in real estate, energy, oil, food, commodities etc appear close to the point of maximum expansion. The endgame may be upon us sooner than we think..

Nice pop in crude too. I thought prices were supposed to be going down because of shale? :lol:

Should be worth 10p on a gallon of unleaded by the end of August. Or maybe 20p if Carney starts printing. B)

130710111619-crude-oil-2weeks-620xa.png

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I agree.One posts in the hope that someone here does.

We won't know until they are on the streets, and then of course it will be "unexpected."

The price of food is the trigger.

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We won't know until they are on the streets, and then of course it will be "unexpected."

The price of food is the trigger.

Isn't it always.When looking through the history of overthrown governments or turbulence in terms of extremes in politics,the issue of food pricing/availability is never far away.

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  • 243 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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