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(MNI) Sydney

The likelihood of a Bank Indonesia rate this year appear to have been effectively scotched, as central bank governor Perry Warjiyo said Thursday "all of BI's policies will be pro-growth this year."

Speaking in the wake of the bank's expected decision to leave the benchmark seven day repo rate unchanged at 3.5%, Warjiyo said "monetary policy, with low interest rates and loose liquidity, will be continued."

Alongside leaving the reverse repo rate unchanged, BI also left its overnight deposit and lending facility rates at 2.75% and 4.25% respectively.

The seven-day reverse repo rate has been at unchanged since February. BI cut rates by 150 basis points from March 2020, in addition to injecting over US$57 billion into the financial system last year, including the direct purchasing of Indonesian Government bonds.


BI has been caught between the need for accommodative policy to continue to stimulate the economy as it battles the pandemic, and the need to protect the rupiah as foreign investors have large holdings of corporate bonds denominated in the local currency.

Pressure to raise rates to support the rupiah has come off in recent months, as the unit crossed the key 14,500 level to the USD after trading up to 14,700 in April. The rupiah was at 14,472 today.

The Indonesian economy is still facing challenges from the pandemic, but grew a better than expected 7.07% in the second quarter.

BI has revised its growth forecasts for 2021 successively lower as COVID restrictions have been re-imposed, and is now forecasting growth of 3.5% to 4.3%, unchanged from the July forecast, but below the 4.1% to 5.1% range forecast in June..

Concerns over slowing economies in south-east Asia are having a knock-on effect in the region, with the Bank of Japan highlighting the issue in recent weeks (MNI: BOJ Worried on Exports, Output on SE Asia Covd-19 Rates).