Indonesia central bank keeps rates unchanged after months of hikes

INDONESIA’S central bank kept its key interest rate unchanged on Thursday (Feb 16), the first pause after six consecutive monthly hikes.

Bank Indonesia (BI) held the benchmark seven-day reverse repurchase at 5.75 per cent. This was expected by the majority of economists in a Reuters poll. Its two other policy rates, the deposit facility and lending facility, were also kept steady, at 5 per cent and 6.5 per cent, respectively.

The central bank reiterated that the current benchmark level was sufficient to achieve its price stability targets, even as the central banks of other major economies continue tightening monetary policy.

Indonesia’s inflation peaked at 5.95 per cent in September 2022, after the government hiked subsidised fuel prices. The rate cooled to 5.28 per cent in January.

BI said it aims to get inflation back to within its target range of between 2 per cent and 4 per cent in the second half of this year. It added that it was looking for core inflation to stay within the same band throughout the year.

Providing more scope for BI to stand pat is the performance of the rupiah. Despite some depreciation this month, the Indonesian currency has remained about 2.5 per cent stronger than at the end of 2022.

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BI also nudged its growth outlook for this year upwards, to the upper end of its 4.5 per cent to 5.3 per cent range, rather than at the midpoint. This came after data earlier this month showed that South-east Asia’s largest economy expanded by 5.3 per cent in 2022, the fastest pace in nine years. REUTERS