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Bank Indonesia Unexpectedly Holds Rates Steady; Sees Room For Easing

Indonesia's central bank left its key interest rate unchanged for a second straight session, defying expectations for a reduction, but policymakers see scope for further easing in future due to the low inflationary pressures and the need to boost growth.

The Board of Governors decided to maintain the 7-day reverse repo rate at 4.50 percent on Tuesday after a two-day policy session, the Bank Indonesia said. Economists were looking for a quarter-point reduction to 4.25 percent.

"This decision considers the need to maintain exchange rate stability amid the uncertainty of global financial markets, although Bank Indonesia sees room for a reduction in interest rates in line with low inflationary pressures and the need to boost economic growth, especially in 2020," the central bank said.

The previous change in the rate was a 25 basis points reduction on March 19. In April, the bank lowered its reserve requirement ratio.

The deposit facility interest rate was kept at 3.75 percent, and the lending facility interest rate at 5.25 percent.

The central bank predicted that Indonesia's economic growth is set to decline this year due to the impact of coronavirus, or Covid-19, but recover next year in line with a revival in the global economy.

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