Indonesia central bank maintains steady policy rates to stabilize Rupiah

When questioned about the easing of Bank Indonesia, the governor exclaimed that it would depend on the inflation rate, economic growth, and how quickly the rupiah can strengthen. Governor Perry Warjiyo also said, “We will remain patient to monitor domestic and global conditions.”

Indonesia’s central bank, Bank Indonesia (BI), decided to keep its policy rates unchanged on Wednesday. The decision reflects a careful approach to monetary policy, emphasizing the need for stability while keeping an eye on the performance of the currency. Bank Indonesia announced that it would exercise patience in its future moves, leaving room for potential rate cuts if deemed necessary.

The benchmark 7-day reverse repurchase rate was held steady at 6.00 per cent, maintaining the level set in October. Economists surveyed by Reuters had unanimously expected this decision, aligning with Bank Indonesia’s strategy to provide stability in the face of economic uncertainties. Furthermore, the two other policy rates remained unchanged. By keeping rates steady, BI aims to strike a balance between supporting economic growth and ensuring price stability.

Governor Perry Warjiyo stated that global market uncertainty has eased simultaneously helping to stabilize the rupiah. It is even seen ending the tendency to build up as a tightening cycle by advanced economies. In the second half of this year U.S. Federal Reserve starts easing, totalling 75 basis points, predicted the Central Bank.

When questioned about the easing of Bank Indonesia, the governor exclaimed that it would depend on the inflation rate, economic growth, and how quickly the rupiah can strengthen. Governor Perry Warjiyo also said, “We will remain patient to monitor domestic and global conditions.”

On Wednesday, the rupiah traded at around 15,640 per dollar, down 0.34 per cent from the previous day. After the announcement to keep rates steady, the rupiah remains unchanged. The decision to keep rates unchanged reflects BI’s dedication to providing a steady economic environment for businesses and consumers alike.

For the year 2024, the Bank Indonesia (BI) targets inflation ranging from 1.5 per cent to 3.5 per cent. BI’s decision is expected to have implications for businesses, investors, and consumers in Indonesia. The gross domestic product (GDP) of Indonesia in the third quarter slowed down and was at its weakest in the last two years.

DBS economist Radhika Rao asserted, “The central bank is unlikely to have any impetus to provide dovish guidance or bring forward policy easing until clarity emerges on the exogenous developments.” According to the forecast by Bank Danamon this year there will be a cut of 50 basis points by Bank Indonesia (BI).