Bank Indonesia Raises Borrowing Costs

The Bank Indonesia increased the interest rates today for its third meeting in a row to efficiently fight the accelerating inflation caused by the growing food and oil prices.

The central bank voted for the interest rate to be raised from 8.5 percent to 8.75 percent. The only reason the government wants to hold the rates that high, despite the unpopularity of such measures, is the fastest price growth in Indonesia in the last 21months.

Although the rate of the Indonesian rupiah remains quite steady against the U.S. dollar since April this year, the USD/IDR rate may experience some decline, as this interest rate hike may cause more investors to secure their assets in the Indonesian currencies and get a higher yield.

The rate increase wasn’t a surprise for the market analysts — the growing fuels costs cause protests by the transportation workers world-wide and Indonesia isn’t the exception. Despite the fact that the high borrowing costs may hurt the position of the current President Susilo Bambang Yudhoyono on the general elections next year, the inflation remains the central bank’s main priority.

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Claims Of Jobless

A weekly compilation of the number of individuals who filed for unemployment insurance for the first time. This indicator, and more importantly, its four-week moving average, portends in the labor market. Jobless claims are an easy way to gauge the strength of the job market.

The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income which gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so the stronger the job market, the healthier the economy. By tracking the number of jobless claims, investors can gain a send of how tight the job market is. If wage inflation threatens, it’s a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events.

The lower the number of unemployment claims, the stronger the job market is, and vice versa.

Leading Indicators

A composite index of ten economic indicators that typically lead overall economic activity. Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the index of leading indicators, investors will know what the economic backdrop is for the various markets.

The index of Leading Indicators is designed to predict turning points in the economy such as recessions and recoveries. Incidentally, stock prices are one of the leading indicators in this index.