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Indonesia's interest rate remains unchanged as economic cycle passes its lowest point

By Ramla Soni

Bank Indonesia's benchmark seven-day reverse repurchase rate stays at 5 per cent

Indonesia’s central bank kept its interest rates unchanged at its first policy meeting of the year. Even though the country’s economic cycle had passed its lowest point, the bank maintained it was open for further “accommodative” policies when conditions improve.

Bank Indonesia (BI) held the benchmark seven-day reverse repurchase rate unchanged at 5 per cent, viewing current policy as conducive to anchoring inflation, supporting economic growth and maintaining financial market stability.

Governor Perry Warjiyo said that the Indonesian economic cycle ”will continue to improve” and that upward momentum would be supported by global growth and higher export demand, including for Indonesian commodities.

Last year BI had cut key rates four times for a total of 100 basis points to help support slow economic growth. It has also cut bank reserve requirements and some lending rules to boost credit growth.

However, data has shown that loan growth slowed to 6.08 per cent in December, the slowest pace since November 2009.

Warjiyo expects easing policies implemented last year to start having an impact on loan growth, which he expects to improve to a 10 per cent to 12 per cent growth rate in 2020.

Bank Indonesia is also confident economic expansion will improve to 5.3 per cent in 2020, up from an estimate of around 5.1 per cent for 2019.

FURTHER READING: Is 2020 the year to invest in Indonesia?

FURTHER READING: Indonesia to sign $18bn energy and trade deals with UAE

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