Indonesia central bank keeps rates unchanged, to be patient on easing

© Reuters. FILE PHOTO: Bank Indonesia's logo is seen at Bank Indonesia headquarters in Jakarta, Indonesia, September 2, 2020. REUTERS/Ajeng Dinar Ulfiana/File Photo

By Gayatri Suroyo and Stefanno Sulaiman


JAKARTA (Reuters) - Indonesia's central bank kept policy rates steady on Wednesday to stabilise the rupiah and keep inflation within target, but said it would be patient over its next moves, with room to cut rates dependent on the currency.


Bank Indonesia (BI) left unchanged its benchmark 7-day reverse repurchase rate at 6.00%, where it has been since October, as unanimously expected by economists surveyed by Reuters. Its two other policy rates were also unchanged.


Global market uncertainty has eased, Governor Perry Warjiyo said, helping the rupiah stabilise and even showing tendency to strengthen as a tightening cycle by advanced economies is seen ending.


The central bank predicts the U.S. Federal Reserve starting easing in the second half this year, totalling 75 basis points.


Asked about room for BI to start easing, the governor said that would depend on how quickly the rupiah can strengthen, the inflation rate, and economic growth.


"We will remain patient to monitor domestic and global conditions," Warjiyo said.


The rupiah was unchanged after the announcement to keep rates steady and traded around 15,640 per dollar on Wednesday, down 0.34% from a day earlier.


BI targets inflation at a range of 1.5% to 3.5% in 2024, below 2023's target of 2% to 4%.


Indonesia's economic activities slowed last year amid declining exports and weakening household spending. Gross domestic product (GDP) growth in the third quarter was at its weakest in two years.


BI maintained its forecast that growth in Southeast Asia's biggest economy would pick up in 2024 to within a range of 4.7% to 5.5%, from 2023's forecast of 4.5% to 5.3%, on rising spending for an election and as the current government rushes to finish infrastructure projects.


With inflation staying within target, most economists have predicted BI's next move will be a cut, though some disagree on the timing, which may depend on the rupiah exchange rate's stability.


"The central bank is unlikely to have any impetus to provide dovish guidance or bring forward policy easing, until clarity emerges on the exogenous developments," said DBS economist Radhika Rao.



Bank Danamon forecast a 50 basis points cut by BI this year.


Its economist Irman Faiz said the central bank has reached its terminal rate but "BI's leeway for rate cuts this year may not match the extent of the Fed's adjustments, considering the anticipated widening trend of the current account deficit."


Indonesia central bank keeps rates unchanged, to be patient on easing  

Related Article

BOJ must be vigilant to yen's impact on economy, says deputy governor Himino

BOJ must be vigilant to yen's impact on economy, says deputy governor Himino

By Leika Kihara TOKYO (Reuters) - Bank of Japan Deputy Governor Ryozo Himino said the central bank m
After-hours movers: Netflix surges, Texas Instruments falls, and more

After-hours movers: Netflix surges, Texas Instruments falls, and more

© Reuters. After-hours movers: Netflix surges, Texas Instruments falls, and moreNFLX
Column-Searching for rift in Transatlantic easing :Mike Dolan

Column-Searching for rift in Transatlantic easing :Mike Dolan

© Reuters. FILE PHOTO: A general view of the Bank of England in the City of London, Britain, Septemb
U.S. spot bitcoin ETFs could win approval next week after last-minute application updates

U.S. spot bitcoin ETFs could win approval next week after last-minute application updates

© Reuters. FILE PHOTO: U.S. Securities and Exchange Commission logo and representations of cryptocur
Robust Nov foreign inflows in Asian equities signal positive outlook for 2024

Robust Nov foreign inflows in Asian equities signal positive outlook for 2024

BNPQY+0.56%Add to/Remove from WatchlistAdd to Watchlist Add Position Positi
BA-owner IAG projects medium-term operating margin of 12%-15%

BA-owner IAG projects medium-term operating margin of 12%-15%

© Reuters. British Airways logos are seen on tail fins at Heathrow Airport in west London, Britain,