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BI holds policy rate, expects muted inflation
Bank Indonesia has kept the seven-day reverse repo rate unchanged at a record low of 3.50 percent as the central bank sees full-year inflation at the lower end of its target range.
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Tantrum trepidation: People leave a Bank Indonesia (BI) office building in Central Jakarta on Feb. 26, 2020. With inflation well under control, the central bank kept its key interest rates unchanged on Tuesday. (JP/Dhoni Setiawan)
B
ank Indonesia (BI) has decided to maintain the benchmark interest rate at a record low of 3.5 percent as the central bank sees the country’s inflation rate at the lower end of the target.
BI also held the deposit facility and lending facility rates at 2.75 and 4.25 percent, respectively, after its two-day governors meeting on Monday and Tuesday.
“This decision is in line with the need to maintain exchange rate and financial system stability amid the low inflation forecast and efforts to support economic growth,” BI Governor Perry Warjiyo said in an online press briefing on Tuesday.
Restrictions imposed on business and leisure activity in response to the country’s second wave of the COVID-19 pandemic caused the annual growth rate of the consumer price index (CPI) to plateau around 1.6 percent in August and September, Statistics Indonesia (BPS) data show.
Read also: Consumer prices fall in September on cheaper foods
Perry said the central bank was expecting this year’s inflation to be below 3 percent, which marks the middle point of BI’s target range between 2 and 4 percent. The inflation is forecast to remain within that range next year.
“Core inflation remained low in line with the weak domestic demand, stable exchange rate and [BI’s] consistency in directing inflation expectations,” said Perry. “Volatile food inflation is slowing, because supplies are sufficient. Administered price inflation picked up slightly in line with the impact of the rising tobacco excise.”
