Indonesia's central bank holds rates steady, as expected

[JAKARTA] Indonesia’s central bank on Wednesday (Sep 23) held interest rates steady at its first meeting after Destry Damayanti’s appointment as governor earlier in September, in line with market expectations.

Bank Indonesia (BI) kept steady the benchmark seven-day reverse repurchase rate at 5.75 per cent, as predicted by 29 of 32 economists polled by Reuters.

The bank also kept the overnight deposit facility rate and lending facility rate at 4.75 per cent and 6.5 per cent, respectively.

The decision is consistent with BI’s efforts to stabilise the rupiah, maintain inflation within target and support growth, Destry said in BI’s first in-person press conference following a rate decision in a year and a half.

BI raised rates by 100 basis points in three moves over May and June to defend the rupiah as it fell to record lows against the US dollar.

While the currency has recovered some ground since June, it has weakened again in recent weeks on investor worries about the fiscal outlook as oil prices rise.

On Wednesday, the rupiah was stronger ahead of the decision and extended its gains after it looked to be up 0.36 per cent against the US dollar on the day.

Parliament approved Destry as governor in September, making her the first woman to lead BI.

She was interim chief at the last policy meeting in August, when rates were held steady, after the surprise resignation of governor Perry Warjiyo in late July.

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Warjiyo’s departure had added to investors’ growing concerns about political interference at BI after President Prabowo Subianto appointed his nephew to a senior role at the central bank and parliament expanded its mandate to support economic growth, though Destry’s appointment was welcomed.

Worries about fiscal spending and transparency issues with the stock exchange have triggered capital outflows, while Indonesian assets have also been hit by risk aversion among investors related to the war in the Middle East and rising interest rates in major economies.

The annual inflation rate picked up to 3.19 per cent in August but stayed within BI’s 1.5 to 3.5 per cent target range, with the government’s fuel subsidies helping to steady prices.

BI kept its economic growth forecast for 2026 at a range of 4.9 to 5.7 per cent. It recently slightly raised its 2027 growth outlook range to 5.2 to 6 per cent. REUTERS