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BI holds benchmark rate as Fed remains dovish
Bank Indonesia decided on Thursday to hold its benchmark seven-day reverse repo rate at 3.5 percent to maintain rupiah stability as the US Federal Reserve maintains its dovish stance for this year.
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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, 2021. (Courtesy of Bank Indonesia/-)
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ank Indonesia (BI) decided on Thursday to hold its benchmark seven-day reverse repo rate (7DRRR) at 3.5 percent to maintain rupiah stability as the United States Federal Reserve held its dovish stance for this year.
Following a two-day meeting, BI also decided to keep the deposit and lending facility rates at 2.75 and 4.25 percent, respectively.
“This decision is consistent with forecasts for low inflation and exchange rate stability and as an effort to strengthen economic recovery,” said BI Governor Perry Warjiyo in an online press conference on Thursday.
Concern that BI would raise the 7DRRR grew alongside concerns that the Fed would tighten its monetary policy after US annual inflation soared to 5 percent in May, the highest in 13 years, mainly due to higher energy and used car prices.
Read also: US inflation spike deemed temporary, BI expects no Fed tapering this year
However, the Fed signaled on Thursday, Jakarta time, that, while it would speed up plans to raise interest rates by a year to 2023, it would maintain the rate in 2021.
“We expect [the Fed] to begin withdrawing quantitative easing in the first quarter of 2022. But what about rate hikes? That will be in 2023,” said BI’s Perry.
