JAKARTA (Reuters) – Indonesia’s central bank held its key policy rates steady for the sixth straight review on Tuesday, saying current levels were sufficient to ensure inflation stays within target this year.
Bank Indonesia (BI) kept the benchmark seven-day reverse repurchase rate at 5.75%, where it has been since January, a decision widely expected in a Reuters poll. Its two other rates were also left unchanged.
Inflation in Southeast Asia’s largest economy, which shot up last year amid rising food and energy prices, returned to BI’s target range in May and is expected to continue to ease heading towards the year’s end.
That has prompted some analysts to predict BI will start to consider easing monetary policy to bolster support for the economy amid an expected slowdown in growth due to falling exports.
BI’s decision comes as market participants brace for a likely U.S. Federal Reserve rate hike later this week.
The trajectory of monetary policy in the United States has affected capital flows to Indonesia and the rupiah’s exchange rate. However, the currency has stabilised in the past week on expectations the Fed is nearing the end of its rate hiking cycle.
Indonesia’s annual inflation in June cooled to 3.52%, the lowest in 14 months, having peaked near 6% in September. BI raised Indonesia’s rates by a total of 225 basis points between August to January.
BI kept its 2023 economic growth outlook in a range of 4.5% to 5.3%, compared with last year’s growth of 5.3%.
(Reporting by Gayatri Suroyo, Stefanno Sulaiman; Editing by Kanupriya Kapoor)
