Indonesian central bank (BI) kept the seven days repo rate steady at 3.75 percent, after surprising investors at the November meeting - Photo by BI Office

JAKARTA (TheInsiderStories) – Indonesian central bank (BI) kept the seven days repo rate steady at 3.75 percent, after surprising investors at the November meeting, said the board of governors. The policymakers also hold the deposit facility interest rate and lending facility interest rate at 3.00 percent and 4.50 percent, respectively.

“This decision is consistent with forecasts for low inflation and maintained external stability, as well as efforts to support economic recovery, said the governor, Perry Warjiyo, in a virtual conference on Thursday (12/17).

He opted to pause and keep the rate for potential easing in 2021, retaining his accommodative stance given benign inflation at 2.1 percent until November and negative GDP. So far, BI has cut the policy rates by 125 basis points.

Warjiyo said, Bank Indonesia continue the policy to stabilize the Rupiah, strengthening the monetary operation strategy, and strengthening accommodative macro-prudential policies to boost credit to priority sectors in the context of national economic recovery. Then, encouraging lower lending rates in coordination with the Financial Services Authority (FSA), strengthening money market deepening by expanding the underlying domestic non delivery forward to increase liquidity and strengthening JISDOR.

In addition, said Warjiyo, the central bank strengthen integrated banking supervision coordination with FSA and Deposit Insurance Agency in order to support financial system stability. The Bank also accelerate digital transformation and synergy to strengthen the momentum of economic recovery and accelerating the implementation of the 2025 Indonesian Payment System Blueprint.

He asserted, the improvement in domestic economic growth is predicted to continue gradually and will increase in 2021. This development is indicated by the continued positive performance of a number of indicators in November 2020, such as increased community mobility in several regions.

According to ING, the governor to remain open to additional monetary easing measures in 2021 with President Joko Widodo recently calling on the central bank to play a major role in “driving the real sector”. The policymakers has more than ample space to cut rates further in 2021 with the policy rate ending the year at 3.75 percent.

Its forecast a gradual pickup in economic activity as Indonesia benefits from a well-coordinated fiscal and monetary response to the ongoing recession. With the latest inflation reading below the 2 – 4 percent target, growth still in negative territory and the Rupiah enjoying a 3.7 percent appreciation of late.

“We do expect BI to cut policy rates again in early 2021,” said the analyst.

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