After a two-day board of governors meeting, the central bank decided to maintain its seven day reverse repo rate at 6 percent — a level that has been unchanged since December last year — while lending facility and deposit facility rates were kept at 6.75 and 5.25 percent, respectively.

BI Governor Perry Warjiyo said the policy was consistent with the central bank and government’s efforts to keep the current account deficit within safe levels as well as maintaining the attractiveness of domestic financial assets.

However, as part of its policy mix, Perry said the central bank would explore ways of relaxing macroprudential regulations to become more accommodative for domestic financing.

“We have our policy mix. On one hand, the interest rate is directed for external stability. On the other hand, we will ease liquidity [supply] and our macroprudential policies will be more accommodative,” Perry told reporters in Jakarta on Thursday.

He added that the central bank was studying how it could direct its existing macroprudential policies, such as the Macroprudential Intermediation Ratio (RIM) and Macroprudential Liquidity Buffer (PLM), among other measures, to encourage more financing of the real economy.

He said BI was exploring the possibility of issuing new macroprudential regulations to boost the output of priority sectors such as small and medium enterprises (SMEs) and tourism.

Perry said the bank would also intensify its monetary operations to ensure an adequate supply of liquidity to support domestic financing, while also exploring other options to boost loan growth to above 12 percent year-on-year.

Economic observer of the Asian Development Bank (ADB) Institute Eric Sugandi said the effectiveness of BI’s monetary operation to boost loan growth was dependent on loan demand.

“The demand side [for loans] had yet to pick up because of stagnant demand for industrial products as well as higher costs of funding because of an increase in loan interest rates, while export-oriented firms might face disruption through the global economic slowdown and trade war this year,” said Eric.

BI believes these external pressures will subside as the United States Federal Reserve (Fed), as well as other central banks in developed countries, have adopted dovish stances with regard to their monetary policies. However, Indonesia may be more exposed to volatility stemming from the ongoing trade tensions between the US and China.

“The impacts from the global [environment] will be more pronounced from the trade aspect, which inspires us to make extra efforts to boost exports,” said Perry.

Reuters reports that both the US and China have laid the groundwork for a deal to mark the resolution of the seven-month trade war with a view of March 1 as a possible deadline for the agreement.

Bahana Sekuritas economist Satria Sambijantoro said the “unusually strong emphasis” from the central bank on the global economic slowdown highlighted BI’s caution in its assessment of the economy.

“This reflects BI’s ongoing concerns on the trade balance front, especially as both month-to-month and year-on-year export growth are already in negative territory for the third consecutive month,” said Satria in a research note.

Satria added it was unlikely the central bank would retreat from its hawkish monetary policy stance in the near-term considering Indonesia’s wide current account deficit, which was recorded at 2.98 percent of the gross domestic product last year.

“Instead of pushing down yields and spurring stock prices, an interest-rate cut might actually do the opposite: the lower interest-rate differentials might discourage foreign investors [from holding rupiah] assets and incite across-the-board outflows,” said Satria.

Satria’s view was shared by Center of Reform on Economics Indonesia research director Piter Abdullah Redjalam, who said BI’s latest decision signaled the central bank’s prudence against lingering uncertainties in the global market.

Eric of the ADB Institute, meanwhile, said there was room for the central bank to lower its rates but suggested that such a move should take place after examining the condition of the domestic economy by the end of the first half of this year, while also monitoring the latest developments from the Fed and the movement of the rupiah against the US dollar after the election, which will take place in April.

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