Indonesia’s central bank decided to keep interest rates unchanged on Wednesday, taking a cautious approach amid global uncertainties.
Bank Indonesia held its key seven-day reverse repo rate at 5.50%. This decision came as geopolitical tensions in the Middle East increased and just hours before the U.S. Federal Reserve was set to announce its own decision. The central bank also kept the overnight deposit facility rate at 4.75% and the lending facility rate at 6.25%.
Governor Perry Warjiyo explained that the rate pause aims to keep inflation under control, maintain rupiah stability, and support economic growth.
He emphasized the need to continuously strengthen Indonesia’s economic growth, which is projected to be between 4.6% and 5.4% this year.
Economists were divided ahead of the decision. In a Wall Street Journal poll, five out of nine experts expected rates to remain steady, while four anticipated a cut, pointing to a stable rupiah and controlled inflation.
CIMB economists noted that Bank Indonesia’s rate cut in May was a timely effort to counter slowing growth. They added that future rate changes will depend heavily on market conditions, especially the stability of the rupiah and clarity in financial markets.
