Indonesian central bank holds rates steady, as expected
The bank also keeps steady its overnight deposit and lending facility rates at 3.75% and 5.50%
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[JAKARTA] Indonesia’s central bank kept its policy rates unchanged on Tuesday (Mar 17), as expected, amid uncertainty about the impact of war in the Middle East on South-east Asia’s largest economy.
Bank Indonesia (BI) held the benchmark seven-day reverse repurchase rate at 4.75 per cent, as had been forecast by 24 of 26 economists polled by Reuters.
The bank also kept steady its overnight deposit and lending facility rates at 3.75 per cent and 5.50 per cent, respectively.
BI cut the benchmark rate by a total of 150 basis points between September 2024 and September 2025. It has kept the rate unchanged since due to concerns over rupiah volatility.
“This decision aims to strengthen the stability of the rupiah exchange rate in the face of deteriorating global conditions caused by the war in the Middle East, as well as to ensure that the 2026-to-2027 inflation target is met,” governor Perry Warjiyo said in an online press conference.
The rupiah has traded at record lows near 17,000 per US dollar this month after a spike in crude prices caused by the war stoked inflation fears globally. It was unchanged at 16,980 per US dollar after the announcement to hold interest rates.
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The currency was already under pressure amid investor concerns over fiscal management, central bank independence and governance of the country’s stock market.
Warjiyo expected the rupiah to remain stable due to good domestic economic prospects and manageable inflation, but also said the central bank had intensified its intervention as the Iran war had affected the currency.
Inflation in South-east Asia’s largest economy was 4.76 per cent in February, above BI’s target range of 1.5 to 3.5 per cent. Officials said this was due to electricity tariff discounts in early 2025 and that the rate would fall back to within the bank’s target soon. REUTERS
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