Indonesia central bank holds key rate, keeps focus on stability

Indonesia's finance ministry believes the market will stabilise and is preparing alternatives for financing

JAKARTA: Indonesia’s central bank on Thursday kept its benchmark interest rate where it has been since November, stressing that the level fits its focus on financial stability and reducing the gap in the current account.

The 7-day reverse repurchase rate was held at 6.00 percent, as expected by all 20 analysts in a Reuters poll.

Hours before BI’s decision, the Federal Reserve abandoned projections for any U.S. interest rate hikes this year.

Bank Indonesia (BI) also held steady the floor and ceiling of the overnight money market, the Deposit Facility and the Lending Facility rates, at 5.25 percent and 6.75 percent, respectively.

BI was one of Asia’s most aggressive central banks last year, raising the benchmark six times by 175 basis points to counter outflows that kept the rupiah under pressure.

Four U.S. rate hikes fuelled the outflows.

When Jakarta markets opened on Thursday, the Fed’s statement forecasting no rate hikes this year sent the rupiah up by more than 0.5 percent.

The rupiah has appreciated about 1.8 percent this year while inflation has cooled to the lowest level since late 2009. - Reuters