During its August policy meeting, Bank Indonesia decided to keep its benchmark seven-day reverse repo rate at 5.75%, in line with expectations. The overnight deposit facility rate was also maintained at 5.00% and the lending facility rate at 6.50%.
The central bank’s decision aligns with its strategy of strengthening the rupiah to minimize the impact of global financial uncertainties. According to Bank Indonesia Gov. Perry Warjiyo, the rupiah has appreciated by 1.78% against the dollar this year and is expected to remain stable due to positive investor sentiment towards Indonesia’s economy, low inflation, and attractive yields on domestic financial assets. Warjiyo assured that the central bank will intervene as necessary to maintain the rupiah’s stability.
Bank Indonesia projects the economy to grow between 4.5% and 5.3% this year, supported by strong domestic demand as evident from the second quarter’s impressive gross domestic product figures. The bank plans to strengthen stimulus measures to further boost growth, particularly on the demand side.
Inflationary pressures are also expected to ease, with the central bank targeting inflation within the range of 2.0% to 4.0%. Warjiyo anticipates that inflation will be between 1.5% and 3.5% next year.
The outlook appears optimistic for Indonesia’s economy, as Bank Indonesia maintains its accommodative stance while monitoring inflationary dynamics and external uncertainties.
