Indonesia central bank keeps benchmark interest rate unchanged, as expected

INDONESIA’S central bank kept its policy interest rates unchanged for a fourth straight meeting on Thursday (May 25), as expected, with the country’s inflation rate continuing to ease.

Bank Indonesia (BI) left unchanged its benchmark 7-day reverse repurchase rate at 5.75 per cent, as unanimously predicted by 31 economists surveyed by Reuters. Its two other policy rates were also kept unchanged.

With inflation in South-east Asia’s largest economy already easing to just above the central bank’s 2 per cent to 4 per cent target range, some analysts said BI could begin to consider easing monetary policy to support growth amid slowing exports.

Governor Perry Warjiyo said core inflation was seen staying within target range, and headline inflation was seen returning to target in the third quarter.

He added the central bank would continue strengthening measures to support the rupiah currency, to mitigate against imported inflation.

The rupiah is the best-performing emerging Asian currency so far in 2023, having strengthened more than 4 per cent since the beginning of the year.

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Economists in a Reuters poll conducted before Thursday’s policy announcement predicted BI would stand pat for the rest of the year and start to cut rates early in 2024.

Indonesia’s annual inflation cooled to 4.3 per cent in April, down from last year’s peak of 6 per cent, after BI raised interest rates a total of 225 basis points between August and January.

Economic growth picked up slightly to 5 per cent in the first quarter, thanks to consumer and government spending offsetting a slowdown in exports and investment, though analysts still flagged risks of further slowdown in coming quarters. REUTERS