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BI signals end to rate hikes, optimism on inflation target
A 25-basis-point increase of its benchmark interest rates in January is adequate to contain inflation, Bank Indonesia has suggested, which economists take to mean the central bank is done with monetary tightening.
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Bank Indonesia Governor Perry Warjiyo speaks during the annual meeting of Indonesia's central bank with financial sector stakeholders in Jakarta, on Nov. 30, 2022. (Reuters/Willy Kurniawan)
B
ank Indonesia (BI) has announced that a rate hike in January is adequate to meet its inflation target, which economists take to mean that the central bank is ending its monetary tightening phase.
At its board of governors meeting on Thursday, BI upped the benchmark seven-day reverse repo rate (7DRRR) by 25 basis points (bps) to 5.75 percent, the same increase as in December.
The lending and deposit facility rates also rose by 25 bps to 6.50 percent and 5 percent, respectively, following the key policy rate.
The central bank's latest rate action was in line with estimates published beforehand by state-owned Bank Mandiri and publicly listed private-lender Bank Danamon.
"The more calculated decision on the policy rate increase is a follow-up step to ensure continued lower inflation expectations and headline inflation in a front-loaded, preemptive and forward-looking measure to maintain core inflation," Perry told reporters after the monthly two-day monetary-policy meeting.
When asked by reporters about the possibility of a further increase, Perry asserted that the rate hikes from August through January were already “adequate” to achieve the bank’s targets on core and headline inflation.
