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Financial News: Indonesia Central Bank Keeps Rate On Hold

Indonesia Central Bank Keeps Rate On Hold

07/21/2022 - 06:38:00 (RTTNews)

(RTTNews) - Indonesia's central bank left its benchmark interest rate unchanged, on Thursday, to support economic recovery.

The board of governors of Bank Indonesia decided to hold the the BI 7-Day reverse repo rate at 3.50 percent. The outcome of the meeting came in line with expectations. The interest rate has been at the current level since February 2021, when the rate was cut by a quarter-point.

The deposit facility rate was maintained at 2.75 percent and the lending facility rate at 4.25 percent.

The central bank expects consumer price inflation to increase on the back of global energy and food prices. In 2022, headline inflation is predicted to exceed the target corridor slightly before returning to 2.0 percent to 3.0 percent range in 2023.

The bank said the economic growth in 2022 is expected to remain in line with its own projection at 4.5-5.3 percent but at the lower end of the range.

The dovish tone from the central bank supports the view that the timing of the first rate hike will be in the final quarter of the year, Gareth Leather, an economist at Capital Economics, said.

With growth set to slow over the coming quarters and inflation to stay relatively low, the tightening cycle, when it does begin, is likely to be gradual, the economist noted.

Headline inflation is already above the target and core inflation is set to follow this trajectory, Nicholas Mapa, an ING economist said. The BI will finally join the rate hike club in late third quarter.

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