Indonesia central bank keeps interest rates unchanged, says it is monitoring global risks

Indonesia's central bank said on Thursday (Dec 15) it is monitoring global risks, including the direction of policies in the United States and China.
Indonesia's central bank said on Thursday (Dec 15) it is monitoring global risks, including the direction of policies in the United States and China. PHOTO: REUTERS

JAKARTA (REUTERS, BLOOMBERG) - Indonesia's central bank said on Thursday it is monitoring global risks, including the direction of policies in the United States and China.

In a statement, Bank Indonesia also said it expected the country to post a relatively large surplus in its balance of payments this year due to year-to-date inflows, but it is monitoring risks of capital reversal.

The bank kept its benchmark interest rate unchanged for a second month as more policy tightening in the US added to the risk of capital outflows from emerging markets.

Governor Agus Martowardojo and his board held the seven-day reverse repurchase rate at 4.75 per cent, in line with the forecasts of all but one of 21 economists surveyed by Bloomberg.

The rupiah slumped as much as 0.8 per cent on Thursday, among the worst hit Asian currencies, after the Federal Reserve signaled it may raise interest rates three more times next year. Market volatility had already heightened since Donald Trump's unexpected victory in the US election in November, giving policy makers in Indonesia reason to pause after six rate cuts this year.

"This decision to hold is consistent with the expectations of inflation for next year and the need to maintain the stability of the rupiah in the near term," said Josua Pardede, an economist at Bank Permata in Jakarta.