Indonesia’s Central Bank Holds Key Rates Steady for Sixth Straight Review
The Governor of Bank Indonesia, Perry Warjiyo, announced on Tuesday that the country’s central bank will be maintaining its key policy rates for the sixth consecutive review. The decision was made in order to ensure that inflation remains within the target range for the year. The benchmark seven-day reverse repurchase rate will remain at 5.75 percent, a level that has been in place since January. The two other rates have also been left unchanged.
Last year, Indonesia experienced a significant increase in inflation due to rising food and energy prices. However, inflation returned to the Bank Indonesia’s target range in May and is expected to continue to decrease towards the end of the year. This has led some analysts to predict that the central bank will begin considering easing monetary policy to support the economy, which is projected to slow down as a result of falling exports.
The decision by Bank Indonesia comes as market participants prepare for a potential interest rate hike by the U.S. Federal Reserve later this week. The trajectory of monetary policy in the United States has had an impact on capital flows to Indonesia and the exchange rate of the rupiah. However, the currency has recently stabilized as market expectations suggest that the Federal Reserve is nearing the end of its rate hiking cycle.
In June, Indonesia’s annual inflation rate dropped to 3.52 percent, the lowest level in 14 months. This is a significant decrease from the peak of nearly 6 percent in September. From August to January, Bank Indonesia raised rates by a total of 225 basis points.
Bank Indonesia has maintained its economic growth outlook for 2023 in a range of 4.5 percent to 5.3 percent. This is compared to the 5.3 percent growth recorded in the previous year.
