The Jakarta Post
Bank Indonesia (BI) maintained its key rate on Thursday as BI Governor Perry Warjiyo said the central bank’s reference rate had approached its peak.
After a two-day policy meeting, BI’s board of governors maintained its key rate, the seven-day reverse repo rate, at 6 percent. The deposit facility and lending facility were also maintained at 5.25 percent and 6.75 percent, respectively.
Perry said the decision was consistent with joint efforts by the central bank and the government to narrow the current account deficit to within a safe level, while maintaining the attractiveness of domestic financial assets.
“As we conveyed earlier, the reference rate had already neared its peak but it was still consistent with the efforts to narrow the current account deficit while maintaining the attractiveness of the yield in domestic financial assets,” said Perry in Jakarta on Thursday.
He emphasized that BI would assess the latest situation in its monthly policy meetings before announcing its monetary policy.
Despite holding its rates, Perry added that the central bank would maintain its hawkish stance.
BI senior deputy governor Mirza Adityaswara said the central bank would look closely at the developments with regard to the monetary tightening path of the United States Federal Reserve, the chairman of which, Jerome Powell, having previously signaled a more dovish tone with regard to the rate 2019 rate hike.
“BI’s stance is very cautious as we are still looking at the current account deficit and external resiliency,” said Mirza.
Perry projected that the balance of payments would record a surplus in the fourth quarter as foreign capital started to flow into Indonesia, which he expected to continue in January, despite preliminary data suggesting that the deficit in the current account would widen to US$ 8.8 billion in the fourth quarter, or above 3 percent. (bbn)