Indonesia: BI maintains key rate at 5.75 percent

• Oct 23, 2018

Bank Indonesia (BI) has decided to hold its key rate as it remains confident the current rate can attract foreign investors to the domestic financial market.

Following a two-day board of governors meeting, BI announced that it had kept its benchmark rate – the seven day reverse repo rate – at 5.75 percent. Lending facility and deposit facility rates also remain unchanged at 6.5 percent and 5 percent, respectively.

“The decision was consistent with efforts to lower the current account deficit to within a safe level as well as to maintain the attractiveness of the domestic financial market so that it will strengthen Indonesia’s resilience amid high global uncertainty,” BI senior deputy governor Mirza Adityaswara told reporters at a press briefing in Jakarta on Tuesday.

Mirza also hinted that the current account deficit in the third quarter of 2018 could be wider than the US$8 billion recorded in the second quarter of 2018 – which was equal to 3 percent of the gross domestic product (GDP).

He explained the widening of the current account deficit in the third quarter could be attributed to weak export performance caused by the slight drop in commodity prices amid the high growth in imports.

The central bank projected that an array of policies that were designed by the government to put a brake on import growth and to encourage exports would result in a lower current account deficit next year, expected to reach 2.5 percent of GDP.

BI also announced on Tuesday that it would effectively allow domestic non-deliverable forward (DNDF) transactions starting from Nov. 1. (bbn)

Source: http://www.thejakartapost.com/news/2018/10/23/bi-maintains-key-rate-at-5-75-percent.html