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Bank Indonesia Keeps Interest Rates Unchanged

Bank Indonesia (BI) left its benchmark 7-day reverse repo rate (BI 7DRRR) at 5 percent during its December meeting - Photo by Bank Indonesia.

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) left its benchmark 7-day reverse repo rate (BI 7DRRR) at 5 percent during its December meeting on Thursday (12/19). The decision is consistent with an effort to anchor inflation and support GDP growth. The lending and the deposit facility rates were also held unchanged at 5.75 percent and 4.25 percent respectively.

The central bank added that it will continue to monitor global financial market conditions and the external stability of the economy. BI’s Governor Perry Warjiyo said the decision is in line with the inflation expectation, external stability and the effort to maintain domestic economic growth amid the slowdown of global economic growth. The monetary policy also aims to maintain liquidity at the end of the year.

“BI will keep monitor global and domestic economy condition in deciding the policy, in order to control inflation and stabilize the economy against the external factors,” he said.

Meanwhile, Warjiyo viewed the global economy will still be a slowdown, but the market uncertainty decreased. There are several positive progress in the global economy, such as the deal between the United States (US) and China and the process of Brexit, though geopolitics issues still shadowed.

It is estimated that the global economy will grow 3 percent at the end of 2019, decreases from 2018 of 3.6 percent. While in 2020, it will be in 3.1 percent, influenced by the advancement of the US and China deal, trade diversion in developing country and central bank monetary policy and geopolitical conditions.

While, Indonesia’s economy will be depending on household consumption, fiscal expansion and export improvement. The country’s economy will grow to 5.1 percent in 2019, supported by better growth in the fourth quarter of 2019. While, in 2020, it will grow in 5.1-5.5 percent.

For the current account deficit, it is estimated around 2.7 percent of GDP in 2019 and 2.5-3 percent of GDP in 2020. While the inflation will be in 3.1 percent in 2019 and more or less 3 percent in 2020.

In terms of banking loans, BI views it will only reach 8 percent in 2019, in line with deposits of 8 percent. However, the loan will grow better to 10-12 percent in 2020, supported by Indonesia’s economic growth.

Going forward, BI will keep implementing mix policy and strengthening the coordination with the regulators. It aims to keep financial stability and encourage banking intermediary.

Written by Staff Editor, Email: theinsiderstories@gmail.com