Indonesia's Central Bank Stands Pat as Expected

By Ying Xian Wong

Indonesia's central bank stood pat at its July policy meeting, holding rates steady again as it keeps a watchful eye on the rupiah.

Bank Indonesia kept its benchmark seven-day reverse repo rate at 6.25% on Wednesday, as widely anticipated. All seven economists polled by The Wall Street Journal had expected the decision. The central bank also held its overnight deposit facility rate at 5.50% and its lending facility rate at 7.0%.

The decision is consistent with the bank's pro-stability monetary policy as a pre-emptive and forward-looking step to ensure inflation remains under the target range in 2024 and next year, the central bank said.

Economists had largely expected the central bank to keep policy settings unchanged, reasoning that it likely wants to see how inflationary and currency pressures play out before making any moves.

Bank Indonesia surprised with a rate hike in April to aid a flailing rupiah. But with the Indonesian currency on firmer ground in recent weeks and domestic price pressures in check, there's little impetus for Bank Indonesia to tighten again, ANZ economists said in a note.

The central bank has been hinting that a rate cut could come in the final months of the year if the rupiah stays stable. The start of monetary policy easing in the U.S. might be another factor.

The Indonesian monetary authority may consider lowering the policy rate once it becomes evident that Federal Reserve rates have peaked, HSBC analysts said in a note, seeing scope for easing to start in the fourth quarter.

Write to Ying Xian Wong at [e-mail]

(END) Dow Jones Newswires

07-17-24 0350ET