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BI stops hiking interest rates after months of hawkish stance
The central bank also prepared a time deposit facility to encourage exporters to store foreign exchange receipts in country.
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The Bank Indonesia (BI) headquarters in Jakarta are pictured on Feb. 26, 2020.
(JP/Dhoni Setiawan)
F
or the first time in months, Bank Indonesia (BI) has kept its key interest rate unchanged, marking a break with its policy of monetary tightening.
The benchmark rate will remain at 5.75 percent, the level it reached in January after being raised by a cumulative 225 basis points (bps) over the course of half a year.
The deposit and lending facility rates also stayed unchanged at 5 percent and 6.5 percent, respectively, the central bank announced following its monthly policy meeting on Thursday.
The decision was in line with the expectations of Bank Mandiri and Permata Bank. However, Moody's Analytics had forecast that the central bank would increase the interest rate by 25 bps to 6 percent.
BI Governor Perry Warjiyo explained that the decision was based on core and headline inflation figures, which had both dropped faster than previously projected, as well as on the national economic situation.
He added that core inflation was expected to be in the range around 3 percent, at a maximum of 3.6 percent, in this year’s first half.
Meanwhile, BI sees headline inflation to be 3.5 percent at most at the end of this year, especially given the base effect caused by the government-ordered increase in fuel prices last September.
