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View all search resultsThe Bank Indonesia board of governors will make a difficult decision in their meeting on Thursday on whether to increase its benchmark seven-day reverse repo rate (7DRRR) to defend the rupiah, at the expense of the stock market and slowdown in economic growth.
Last month, Bank Indonesia (BI) decided to maintain its benchmark interest rate, BI’s seven-day reverse repo rate at 4.75 percent. This decision was made only a day after the United States Federal Reserve increased its policy rate, the Fed funds rate, by 25 basis points from 0.5 to 0.75 percent.The policy stance of BI also marks the end of monetary policy easing that has been initiated since the beginning of this year.
From the theoretical perspective, low interest rates are an important prerequisite for investment demand. In Bank Indonesia’s (BI) point of view, high interest rates cause many adverse effects. On one hand, a high deposit interest rate could eliminate entrepreneurial spirit.
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