By Gayatri Suroyo and Stefanno Sulaiman
JAKARTA (Reuters) – Indonesia’s central bank kept interest rates steady on Wednesday, focusing on controlling inflation and stabilizing the rupiah amid global market uncertainties.
This decision contrasts with rate cuts by Thailand and the Philippines. Most economists expect Bank Indonesia (BI) to lower rates by the end of the year after a surprise cut last month.
BI Governor Perry Warjiyo warned that rising tensions in the Middle East and U.S. rate cut expectations could impact the rupiah, which has been volatile recently.
Warjiyo stated, “The priority of short-term monetary policy is maintaining the stability of the rupiah due to global market uncertainties.”
The central bank maintained the benchmark 7-day reverse repo rate at 6.00%, the overnight deposit rate at 5.25%, and the lending rate at 6.75%.
Economist Ryota Abe from SMBC noted that any future rate cuts will depend on the foreign exchange market by mid-November, coinciding with the bank’s next meeting and U.S. election outcomes.
Since last month’s cut, the rupiah has fluctuated against the dollar amid changing U.S. rate expectations and Middle East conflicts.
Warjiyo mentioned that they still anticipate the U.S. Fed to cut rates by 25 basis points in November and December, though timing may vary.
The central bank will continue to evaluate further rate cuts based on inflation, rupiah stability, and growth projections.
Southeast Asia’s largest economy saw annual inflation drop to 1.84% last month, the lowest since 2021, nearing Bank Indonesia’s target of 1.5% to 3.5%.
Indonesia’s economic growth remains steady at 5% post-pandemic, though below the 8% target set by newly inaugurated President Prabowo Subianto.
The central bank projects economic growth for this year between 4.7% to 5.5%, with expectations for acceleration next year.
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