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Indonesia Holds Key Interest Rate Steady

Indonesia's central bank left its key interest rates unchanged on Thursday, citing a subdued inflation outlook and expectations of a sustained economic recovery.

The board of governors decided to hold the the BI 7-Day reverse repo rate at 3.50 percent, the Bank Indonesia said in a statement. That was in line with economists' expectations.

The previous change in the rate was a quarter-point reduction in February.

The deposit facility rate was maintained at 2.75 percent and lending facility rates at 4.25 percent.

The bank said the decision was consistent with projected low inflation and efforts to maintain Rupiah exchange rate stability, while boosting the economic recovery.

"Moving forward, a stronger global economy, faster vaccination rollout and closer policy synergy will drive the domestic economic recovery despite the recent uptick in Covid-19 cases reported at the end of the second quarter," the bank said.

"Consequently, economic growth in 2021 remains in line with Bank Indonesia's April 2021 projection of 4.1-5.1 percent."

The central bank projected "a low and manageable" current account deficit for this year at approximately 1.0-2.0 percent of GDP.

The bank said it will continue to strengthen exchange rate stabilization policy in line with the rupiah's fundamental value and market mechanisms through effective monetary operations and adequate market liquidity.

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