Bank Indonesia holds rates as economy emerges from Covid crisis

Jakarta

INDONESIA'S central bank left its benchmark interest rate unchanged at a record low as the economy begins to show signs of recovery from the country's worst coronavirus wave yet.

Bank Indonesia held the seven-day reverse repurchase rate at 3.5 per cent on Tuesday, as expected by all 31 analysts in a Bloomberg survey. The key rate has been at that level since February, and central bank governor Perry Warjiyo has signalled that the bank could remain on hold at least until the end of the year.

South-east Asia's biggest economy has been buoyed by a sharp improvement in its Covid-19 outbreak thanks to movement curbs, aggressive testing and an advancing vaccination campaign. Last week the country added its fewest new cases since November, while daily fatalities are at a three-month low. Lockdown measures have been relaxed further, with malls, tourist sites and places of worship reopening with limited capacity.

That bodes well for an economy reliant on private consumption, especially with gross domestic product growth expected to dip in the third quarter as the outbreak peaked in July and August. Bank Indonesia expects GDP to expand 3.5-4.3 per cent this year, slightly below the government's 3.7-4.5 per cent estimate.

As the world's major central banks weigh unwinding their pandemic-era monetary support, Bank Indonesia has affirmed it will keep policy settings loose for as long as possible while the recovery firms up, even extending a programme to buy government bonds through next year. BLOOMBERG