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Financial News: Bank Indonesia Holds Interest Rates Steady

Bank Indonesia Holds Interest Rates Steady

05/25/2021 - 11:43:00 (RTTNews)

(RTTNews) - Indonesia's central bank again left its key interest rates unchanged on Tuesday, citing the improving economic outlook and the rupiah stability. The board of governors decided to hold the the BI 7-Day reverse repo rate at 3.50 percent, the Bank Indonesia said in a statement. That was in line with economists' expectations. The previous change in the rate was a quarter-point reduction in February. The deposit facility rate was maintained at 2.75 percent and lending facility rates at 4.25 percent. "The decision is consistent with projected low inflation and efforts to maintain rupiah exchange rate stability, while accelerating the national economic recovery," the central bank said.

Additional policy measures announced by the central bank included lowering the upper limit on credit card interest rates from 2 percent to 1.75 percent per month.

The bank retained its April projection for growth this year at 4.1-5.1 percent. The central bank said it will continue to strengthen exchange rate stabilisation policy in line with the rupiah's fundamental value and market mechanisms through effective monetary operations and adequate market liquidity.

Bank Indonesia forecast a low and manageable current account deficit for this year in the 1.0-2.0 percent of GDP range.

"We expect the central bank to keep policy rates unchanged in the near term given the likely recurring threat of rising bond yields and depreciation pressures on the currency," ING economist Nicholas Mapa said.

"Interestingly, Warjiyo did signal that BI could reverse course should inflation begin to pick up but he quickly clarified that price pressures would not likely accelerate until perhaps 2022."

ING expects the bank to roll out additional measures to bolster bank lending via targeted initiatives to help support investment activity without resorting to additional rate cuts.

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