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Bank Indonesia trims rate to record low to spur economic recovery
Bank Indonesia (BI) has cut its benchmark interest rate for the sixth time since COVID-19 struck Indonesia, bringing it to a record low.
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Bank Indonesia (BI) Governor Perry Warjiyo talks during a virtual press conference held after the central bank's two-day policy meeting on Jan. 21. (Courtesy of Bank Indonesia/-)
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ank Indonesia (BI) has cut its benchmark interest rate for the sixth time since COVID-19 struck Indonesia, bringing it to a record low in an attempt to support the economic recovery.
Thursday’s decision brings the central bank’s seven-day reverse repo rate down 25 basis points (bps) to 3.5 percent, the lowest level since the rate was introduced in 2016. The bank last cut its rate in November last year.
BI also lowered the deposit facility rate by 25 bps to 2.75 percent and the lending facility rate by 25 bps to 4.25 percent following its two-day policy meeting. The benchmark rate will affect banks’ savings and loan interest rates, as well as bond yields.
“This decision is consistent with our projected low inflation and stable rupiah exchange rate and to push economic recovery,” BI Governor Perry Warjiyo said during a press conference broadcasted on YouTube.
Indonesia’s annual inflation rate slowed in January to 1.55 percent year-on-year (yoy), the lowest since November 2020, as job losses, business closures and mobility restrictions limited consumers’ purchasing power, Statistics Indonesia (BPS) data shows. The rate was also below Bank Indonesia's target range of 2 to 4 percent for this year.
Read also: Inflation slows as COVID-19 restrictions reduce demand
Meanwhile, the rupiah has recovered to around Rp 14,000 against the greenback so far this year, up from Rp 16,000 in March 2020, the lowest rate since the 1998 Asian financial crisis.
