JAKARTA- Indonesia’s central bank held interest rates unchanged on Wednesday, as expected, saying policy was focused on maintaining stability in the rupiah currency while making sure inflation stays within its target range.
Bank Indonesia (BI) kept the benchmark rate steady at 6.00 percent, as predicted by 25 of 34 analysts polled by Reuters.
The central bank also left the overnight deposit facility and lending facility rates at 5.25 percent and 6.75 percent, respectively.
BI had cut rates by 25 bps in September, just ahead of the start of the US Federal Reserve’s rate-cutting cycle, and authorities have said they would continue to assess the capacity for further rate cuts once global market volatility eased.
The rupiah has been weakening since early October, though so far remains above lows hit earlier in 2024.
Announcing the policy decision, Governor Perry Warjiyo said global dynamics had changed in the month since BI’s last policy review, with economic, geopolitical and trade fragmentation risks all rising.
He said that under President-elect Donald Trump, US policy could be more inward looking, and an expansive fiscal policy could limit the Federal Reserve’s easing cycle and affect global inflation.
Warjiyo said the rupiah’s recent weakness was due to broad US dollar strength and capital flight to US dollar assets since the US election, but said it was manageable and all monetary instruments would be used to support the currency’s stability.
Domestically, annual growth in Southeast Asia’s largest economy was 4.95 percent in the third quarter. While the pace remains solid, it was far slower than the 8 percent rate that President Prabowo Subianto said he wants to achieve. Inflation has stayed within BI’s target since the middle of last year, and Warjiyo said it was seen staying within the 1.5 percent to 3.5 percent target range. Annual inflation in October was 1.71 percent.
