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BI keeps rates unchanged despite hawkish Fed comments
The central bank says it has considered the possibility of the United States Federal Reserve, raising its key interest rate to 5.5 percent in July.
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Bank Indonesia (BI) Governor Perry Warjiyo arrives for a media briefing at BI headquarters in Jakarta on Jan. 19.
(Reuters/Ajeng Dinar Ulfiana)
B
ank Indonesia (BI) has kept its key interest rates unchanged for the fifth month in a row despite a hawkish stance from the United States Federal Reserve (Fed), which is widely expected to tighten monetary policy further this year.
Following its monthly policy meeting on Thursday, the central bank said the decision was consistent with its target to keep the annual inflation rate between 2 percent and 4 percent.
Its effort is currently focused on keeping the rupiah’s exchange rate stable and mitigating potential adverse effects on Indonesia’s economy from global financial markets.
BI announced that the benchmark rate would remain at 5.75 percent, while the deposit and lending facility rates were also kept unchanged at 5 percent and 6.5 percent, respectively.
The decision was in line with forecasts from BCA, Bank Mandiri and Permata Bank.
Core inflation, which has become the de-facto basis for BI's interest rate policy, eased to 2.66 percent in May from 2.83 percent in the preceding month. Core inflation excludes from the CPI calculation certain food and energy products that tend to have volatile prices.
Meanwhile, Statistics Indonesia (BPS) show that headline inflation, or consumer price index (CPI) growth, dropped to exactly 4 percent, the upper limit of BI's target range.
