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Bank Indonesia leaves analysts puzzled by long wait to hold rate

Friday, July 21, 2017 - 10:32

[JAKARTA] Indonesia's central bank left its benchmark interest rate unchanged, as expected, on Thursday, but left analysts puzzled by delaying the announcement until close to midnight.

No reason was given by the bank for the late release. Bank Indonesia doesn't have a specific time for its monthly press conference where the rate decision is disclosed, but in recent months it's come before 6 pm local time.

"Quite why the decision took so long is unclear - the decision was exactly what everyone had expected," said Gareth Leather, a senior Asia economist at Capital Economics Ltd in London. "The policy statement offers no clues to why the meeting dragged on so late into the evening." All 19 economists surveyed by Bloomberg correctly predicted the bank will hold the seven-day reverse repurchase rate at 4.75 per cent, where it's been since the last rate cut in October. Bank Indonesia said inflation - which has ticked up recently because of rising food and electricity costs - will remain within it's 3 per cent to 5 per cent target band, while the currency has stabilized.

Bank Indonesia cut interest rates six times last year and eased reserve limits on lenders in July to help spur lending and support economic expansion. Loan growth of 8.7 per cent in May is below the central bank's goal of 10 per cent to 12 per cent.

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The economy will probably expand at a slightly faster pace in the second quarter at about 5.1 per cent, Assistant Governor Dody Waluyo told reporters in Jakarta. There are early signs that retail sales growth is improving, he said.

"We were very surprised it was so late," said Ho Woei Chen, an economist at United Overseas Bank Ltd in Singapore. The decision was a "non-event" and market reaction will probably be muted, she said.

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