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Bank Indonesia holds rate, lowers GDP growth forecast
The Ukraine war and surging prices are seen to be limiting Indonesian exports and spending.
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The Bank Indonesia (BI) headquarters in Jakarta on May 8, 2014. (AFP/Romeo Gacad)
B
ank Indonesia (BI) decided on Tuesday to hold its benchmark interest rate at 3.5 percent and lower its gross domestic product growth forecast for Indonesia.
Following a two-day governors' meeting, the central bank also decided to keep the lending rate and deposit rate at 4.25 and 2.75 percent, respectively.
BI downgraded the GDP growth forecast to 4.5 to 5.3 percent from 4.7 to 5.5 percent as the Ukraine war stymies export growth and surging food and energy prices limits spending.
"This decision is in line with the need to maintain the rupiah's stability and control inflation, and to boost economic growth amid rising external pressures from the Russia-Ukraine geopolitical conflict and monetary policy normalization in developed economies," BI Governor Perry Warjiyo told members of the press during a briefing.
BI could afford to keep its benchmark rate at an all-time low as domestic inflation, which stood at 2.64 percent in March, was within the target range of 2 to 4 percent.
In contrast, central banks in many developed economies have raised rates to combat high inflation. The United States Federal Reserve raised its benchmark rate for the first time in four years in March after US inflation hit a 40-year high of 7.9 percent.
Read also: BI holds rate at 3.5% with eye on Ukraine crisis
