Indonesia central bank (BI), which raised interest rate last month, decided to freeze it this month.
According to reports on the 23rd (local time), BI held a monetary policy meeting and announced that it would maintain the 7-day reverse redemption bond (RRP) rate, which is used as the base rate, at 6.0%.
BI President Peri Warjilo explained the background of the freeze decision, saying that risk factors such as global energy prices, domestic food prices, and rupiah exchange rates are being monitored.
Last month, Indonesia consumer price growth rate was 2.56% per annum, staying at the BI target level (2-4% per annum).
BI raised interest rates for six consecutive months from August last year to January this year to curb inflation that soared after the novel coronavirus infection. As a result, the base interest rate, which was 3.5%, rose to 5.75%.
Since then, as prices stabilized, interest rates have been frozen for eight consecutive months from February to September. However, as the rupiah exchange rate soared against the dollar, it beat financial market expectations and raised its key interest rate by 0.25 percentage point to 6.0 percent last month. Due to this effect, the exchange rate, which was close to 16,000 rupiah per dollar, has now fallen to 15,500 rupiah per dollar.
BI’s decision was largely in line with financial market expectations. President Warjilo said that Indonesia’s economy is solid thanks to domestic consumption and investment, and predicted that gross domestic product (GDP) growth will reach the level of BI’s forecast (4.5 to 5.3%) this year. It also predicted that next year, growth will be stronger than this year, and inflation will be stable at 1.5 to 3.5%.
