Indonesia central bank holds rates to underpin rupiah


  • Banking
  • Friday, 18 Sep 2020

Bank Indonesia (BI) held the benchmark seven-day reverse repurchase rate steady at 4.00% for a second month running.

JAKARTA: Indonesia’s central bank held its key interest rate unchanged yesterday to keep the rupiah currency stable, as the governor stressed that quantitative easing was a better way to support an economy tipping into recession due to the coronavirus pandemic.

Bank Indonesia (BI) held the benchmark seven-day reverse repurchase rate steady at 4.00% for a second month running.

All 22 analysts in a Reuters poll had expected no change due to pressure on the rupiah, which has fallen nearly 2% this month amid concerns over the central bank’s independence after parliament examined recommendations to overhaul its operations and mandate.

The rupiah was flat after the rate announcement, while the main stock index was down 0.8%.

Governor Perry Warjiyo told a virtual news briefing the rate decision was taken to stabilise the rupiah and despite low inflation.

“To support economic recovery from the impact of the Covid-19 pandemic, BI is focusing on quantitative channels by providing liquidity, including BI’s support to the government, ” Warjiyo said.

BI has resorted to unconventional policies to cushion the blow from the coronavirus pandemic, including by directly financing some of the government’s Covid-19 programmes.

It has also trimmed its key rate four times, cut banks reserve requirements and eased lending rules so far this year.

Analysts are worried that the pandemic-led debt monetisation could be extended if parliament passes some of the proposals to amend a central bank law. — Reuters

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