JAKARTA - Indonesia’s central bank kept its policy rates unchanged on Feb 21, as expected, saying current levels were consistent with efforts to keep the rupiah currency stable and ensure inflation remains within target.
Growth in South-east Asia’s largest economy fell slightly in 2023 amid falling commodity prices, though at 5.1 per cent, it remained one of the fastest among countries in the Group of 20 major economies.
Some economists expected economic growth to remain around that level, as last week’s presidential and parliamentary elections and the expected transition of power in October affect investment decisions.
Bank Indonesia (BI) left its benchmark seven-day reverse repurchase rate steady at 6 per cent, where it has been since October, as widely expected in a Reuters poll. Its two other main rates were also kept unchanged.
Markets had cheered the victory of Defence Minister Prabowo Subianto, after so-called quick ballot counts by independent pollsters showed he had won the presidency with nearly 60 per cent of votes.
In a press conference, BI governor Perry Warjiyo said the current main rate is enough to manage inflation, while other tools are geared to support growth.
Inflation in Indonesia has stayed within BI’s target range since the middle of 2023, with the central bank’s 250 basis points in rate hikes between August 2022 to October 2023 keeping price pressures in check.
The global economy is expected to perform better than expected in 2024, especially due to growth in the US and Indian economies; however, BI is monitoring risks elsewhere.
“Sluggish growth in China and contractions in the UK and Japan can lower the global growth prospect in the future,” Mr Warjiyo said.
He maintained BI’s baseline scenario that room for its rate cut is in the second half of the year.
The rupiah was largely unchanged before the rate announcement on Feb 21, but strengthened slightly by 0.1 per cent following the decision.
BI kept its growth forecast for 2024 at a range of 4.7 per cent to 5.5 per cent. REUTERS
