Indonesian central bank holds interest rates steady, as expected

The entrance of Bank Indonesia headquarters in Jakarta. — Bloomberg

JAKARTA: Indonesia's central bank held interest rates unchanged at a review on Wednesday, as expected, saying the current benchmark level remained consistent with keeping inflation in check and maintaining the stability of the rupiah currency.

Bank Indonesia (BI) kept the benchmark 7-day reverse repurchase rate at 6.25%, as predicted unanimously by 33 economists polled by Reuters.

BI also left unchanged the overnight deposit facility rate at 5.50% and the lending facility rate at 7.00%.

BI last month raised interest rates in a surprise move, seeking to try to entice foreign portfolio investors to buy Indonesian assets and strengthen the currency.

The rupiah had dropped to four-year lows against the U.S. dollar in April. Even though it has recovered some of the losses, the currency remains vulnerable to changes in global risk sentiment related to the outlook for U.S. monetary policy and global conflicts.

Governor Perry Warjiyo said the decision was in line with "pro-stability monetary policy" to ensure that inflation is controlled within its target while maintaining the stability of the rupiah and inflows into the country.

The currency was a touch softer at 16,005 per dollar after BI's announcement, from 15,995 per dollar prior to the announcement.

Warjiyo said the rupiah is expected to stabilise with a tendency to strengthen, as Indonesian assets offered an attractive return to investors.

Data earlier this month showed Indonesia's economy grew an annual 5.11% in the first quarter, the fastest rate in three quarters. The annual inflation rate, meanwhile, eased slightly to 3% in April, within BI's 1.5% to 3.5% target range.

BI kept its growth outlook for 2024 at a range of 4.7% to 5.5%, compared to last year's 5.05%.- Reuters

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Bank of Indonesia , interest rate


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