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MNI STATE OF PLAY: Bank Indonesia Upbeat On The Economy, Rupiah

MNI (Sydney)
SYDNEY (MNI)

Indonesia's central bank is upbeat on the re-opening domestic economy and with inflation subdued, the rupiah stable and growth forecasts at 5.7% for this year is under no immediate pressure to change its policy settings.

As expected, Bank Indonesia yesterday left its benchmark seven-day reverse repo rate steady at 3.50% while also maintaining the overnight deposit and lending facility rates at 2.75% and 4.25%, respectively.

BI Governor Perry Warjiyo talked up the outlook for the economy in a Thursday statement, expecting a rebound in the final quarter of the year underpinned by exports, larger fiscal spending and increasing consumption and investment, see: MNI STATE OF PLAY: Bank Indonesia: Economy Backs Rate Outlook.

Third quarter growth disappointed at 3.5%, but mobility data and positive retail sentiment suggests a strong finish to the year.

ACCOMODATIVE OUTLOOK

Warjiyo described BI's stance as accommodative and said this had helped push down commercial lending rates and increased liquidity in the financial system.

With CPI inflation at 1.66% annually against BI's "target corridor" of 1% to 3%, and the rupiah "under control" despite instability in the financial markets, BI can maintain its policy settings and wait for the expected recovery in 2022.

This gives the bank the policy ammunition to respond if tightening by the U.S. Fed impacts on currency markets next year, when BI's next move on interest rates is expected to be a hike.


MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

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