Indonesia: BI will review rates in 3Q22 if inflation picks up

  • Indonesia’s central bank will review policy rate levels in 3Q22 to head off any spike in inflation next year, Governor Perry Warjiyo said, after it decided to keep rates unchanged for now to bolster an economic recovery.
  • Bank Indonesia (BI) kept steady its benchmark 7-day reverse repurchase rate at 3.50%, as widely expected in a Reuters poll. Its two other main rates were also left unchanged.
  • Warjiyo told an online news conference inflation will remain benign in 2022 as production capacity will be able to meet rising demand, while reiterating that policy rates will be unchanged until inflation fundamentally rises above BI’s 2% to 4% target range.
  • “Our prediction is that will happen in 2023 and for that, we will review our monetary policy stance, especially interest rates in 3Q22,” he said. Warjiyo has said the main focus for BI’s monetary policy is maintaining financial market stability amid a global trend toward monetary tightening.
  • He noted that uncertainty is rising due to geopolitical tensions, high global inflation and rising COVID-19 cases, but he expected the rupiah currency to remain stable due to improving fundamentals.
  • BI maintained the 2022 GDP growth outlook at 4.7% to 5.5%, expecting the spread of the Omicron variant to have an “insignificant” impact.

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