Bank Indonesia Keeps Benchmark Rate

Bank Indonesia (BI) has kept its 7-days reverse repo rate at 4.75 percent. Other monetary benchmark rates such as deposit facility rate and lending facility rate have also been kept at 4 and 5.5 percent. “The decision was made by BI to preserve domestic macroeconomic stability,” Bank Indonesia spokesman Tirta Segara said yesterday.

As such, the BI has maintained its benchmark rate since October 2016. Tirta did not deny that economic policy uncertainty in the United States future following Donald Trump’s victory in the US presidential election in November have also come into play. However, he said that domestic inflation rate is positive at around 3.02 percent.

Indonesian economy will also be affected by China’s economy. The United States and China are Indonesia’s major trade partner. “BI and the government will continue to collaborate to monitor every development,” Tirta said.

Finance Minister Sri Mulyani Indarwati said global economic outlook may not improve this year. “Economic growth in developed countries, such as the United States, Japan and European countries, may not be as rapid as expected,” Minister Sri said.

Sri said the United States is the only developed country that may recover from the economic downturn. However, at the same time, the US economic recovery may pose new problems to the global economy. The Fed, according to Sri, may increase interest rates should the US manages to achieve economic growth.

The Fed itself had said that it plans to increase interest rates. However, it would await Trump’s policy on tax cuts and increased infrastructure and defense spending that may lead to increase in inflation.