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BI holds rate at record low of 3.5% to shield rupiah
The central bank is keeping its policy rate at 3.5 percent to stabilize rupiah following US President Joe Biden's landmark stimulus plan, which has prompted global investors to dump emerging market assets.
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A clerk counts US banknotes at a money changer in Jakarta in this file photo. (Antara/Rivan Awal Lingga)
Bank Indonesia (BI) has decided to maintain its benchmark interest rate at 3.5 percent, the lowest rate since the seven-day reverse repo rate (7DRRR) was introduced in 2016, to protect the rupiah exchange rate amid market uncertainty.
Following a two-day policy meeting, the bank has also decided to maintain its deposit facility rate at 2.75 percent and its lending facility rate at 4.25 percent.
“This decision aligns with the need to ensure the stability of the rupiah exchange rate from rising global market uncertainty in the midst of expected low inflation,” BI Governor Perry Warjiyo told a virtual press conference on Thursday.
Read also: BI trims rate to record low for economic recovery
BI recorded rupiah depreciation of 2.62 percent year-to-date (ytd) as global investors dumped emerging market assets on the back of a rebound in United States Treasury yields, driven by the US’ positive domestic growth outlook after President Joe Biden signed a US$1.9 trillion recovery stimulus on March 11.
The stimulus is expected to accelerate recovery for both the US and the global economy, but it has triggered capital outflows from emerging markets, including Indonesia, putting pressure on these currencies against the US dollar.
