In its latest policy meeting, Bank Indonesia has made the expected decision to keep interest rates unchanged. The central bank aims to uphold the stability of the Indonesian rupiah and ensure controlled inflation.
Interest Rate Decision
Bank Indonesia has decided to maintain the benchmark seven-day reverse repo rate at 5.75%. This decision aligns with the expectations of all six economists polled by The Wall Street Journal. Additionally, the overnight deposit facility rate will remain at 5.00%, while the lending facility rate will stay at 6.50%.
Rupiah Stability and Economic Prospects
Bank Indonesia Governor Perry Warjiyo emphasized that the central bank’s stabilization efforts have effectively controlled the Indonesian rupiah. Year-to-date, the rupiah exchange rate has strengthened by 3.63%. Warjiyo expressed optimism that the rupiah will continue to strengthen due to promising economic prospects.
Inflation Outlook
Inflation in Indonesia has surpassed initial expectations and is now within the central bank’s target range of 2.0%-4.0% for 2023. Looking ahead, inflation is projected to be in the range of 1.5%-3.5% next year, according to Warjiyo.
Economic Growth
Bank Indonesia remains confident that Indonesia’s economic growth will be supported by domestic demand. The central bank expects the local economy to expand between 4.5% and 5.3% this year.
Conclusion
Bank Indonesia’s decision to keep interest rates unchanged reflects its commitment to maintaining stability in the exchange rate and controlling inflation. With positive economic prospects, the rupiah is expected to strengthen further, providing a solid foundation for Indonesia’s growth in the coming year.
