Indonesia: BI holds rate at 3.5% with eye on Ukraine crisis

• Bank Indonesia (BI) decided to hold its benchmark seven-day reverse repo rate (7DRRR) at 3.5% to support Indonesia’s economic recovery.
• “This decision is in line with the need to maintain exchange rate stability and the stability of inflation, and efforts to continue economic recovery amid external pressures that mainly arise from the Russia-Ukraine geopolitical tensions,” he said.
• BI’s decision comes shortly after the Reserve raised its benchmark rate by 25bps on 16 Mar 22.
• “We will maintain a low policy rate of 3.5% until there are signs of fundamental inflationary pressures,” Perry said, adding that “monetary policy responds to a fundamental increase in inflation which is seen in core inflation” and that BI does not “respond directly to the increase in volatile food and administered prices inflation.
• Warjiyo said that the central bank is coordinating with the government to manage the impact of higher global energy prices, and looking to support policies to manage food prices ahead of Ramadan, which starts in Apr 22.
• Compared to the US, Indonesia’s inflation was relatively low at 2.06% in Feb 22, which is still in line with BI’s target range of 2% to 3% for 2022. This gives BI more room to maintain the low rate for the sake of GDP growth.
• Perry also said the rupiah depreciated 0.42% ytd as of 16 Mar 22, which is lower than other emerging economies such as Malaysia (-0.76%), India (-2.53%) and the Philippines (-2.56%).

External Link : https://www.thejakartapost.com/business/2022/03/17/bi-holds-rate-at-3-5-with-eye-on-ukraine-crisis.html

External Link : https://www.bloomberg.com/news/articles/2022-03-17/indonesia-holds-rates-to-support-recovery-with-eye-on-war-risks