Indonesia’s central bank kept interest rates unchanged on Thursday (Nov 23), as expected, despite renewed volatility in the rupiah exchange rate as investors speculate over the possibility of an end to US monetary tightening.
Bank Indonesia (BI) left unchanged the benchmark 7-day reverse repurchase rate at 6.00 per cent, as expected by a strong majority of economists polled by Reuters, following October’s surprise rate hike. Its two other policy rates were also kept steady.
BI Governor Perry Warjiyo said the decision was consistent with maintaining the rupiah’s stability and mitigating against imported inflation.
BI expects inflation to stay within the central bank’s target range this year and next, but is monitoring risks like high global energy prices and domestic food prices, as well as impact of rupiah exchange level on inflation, Warjiyo said.
The rupiah’s exchange rate has been highly volatile against the US dollar in the past few weeks, sensitive to swings in market sentiment about the Federal Reserve’s tightening cycle.
The central bank has been juggling the need to support economic growth with pressure on the rupiah, which can affect domestic inflation.
Even though Southeast Asia’s largest economy has logged solid growth, annual expansion in the third quarter was at its slowest pace in two years of 4.94 per cent, as exports shrank and household spending softened.
Inflation in October picked up slightly to 2.56 per cent, but remained within BI’s 2 per cent to 4 per cent target range for this year.
Source: Reuters