Monday, 27 September, 2021

Indonesia’s central bank holds rates

JAKARTA: Indonesia’s central bank held its key interest rate at a record low on Thursday to support the economy amid a growing Covid-19 crisis, but said recent coronavirus mobility curbs had hit activity by less than previously expected.

Bank Indonesia (BI) kept the benchmark 7-day reverse repurchase rate at 3.50%, where it has been since February, as expected by all 31 economists in a poll.

The central bank also maintained its two other main policy rates unchanged, report agencies.

Governor Perry Warjiyo said BI’s decision was consistent with the need to support the economy while keeping the local currency stable. The rupiah has lost more than 2 per cent against the US dollar since the Federal Reserve in June flagged an earlier-than-expected exit from its pandemic-era stimulus.

“For 2021, all of BI’s policies are pro-growth, except for those aimed at maintaining the currency stability in anticipation of global market uncertainty,” Governor Perry Warjiyo said in an online news conference.

The announcement comes as Indonesia has ramped up coronavirus restrictions in recent weeks amid surging infections in a country that has the biggest caseload and death toll in Southeast Asia.

The government said this week it would extend movement restrictions in place since July 3 in some areas until at least Sunday.

Due to the curbs, BI has cut its 2021 economic growth forecast range to between 3.5 per cent and 4.3 per cent from 4.1 per cent to 5.1 per cent previously.

But the midpoint of the forecast range was 3.9 per cent, slightly higher than the 3.8 per cent BI forecast a week ago, because the curbs are expected to be eased next week, sooner than BI’s previous assumption, Mr Warjiyo said.

GDP shrank 2.1 per cent last year, the first full-year contraction since 1998.

The rupiah, which gained ahead of BI’s announcement, barely moved after the decision.