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Economist at UOB Group Enrico Tanuwidjaja and Haris Handy assess the latest interest rate decision by the BI.

Key Quotes

“Bank Indonesia (BI) kept its benchmark rate unchanged at 3.50% at its June 2021 monetary policy meeting (MPC). Consequently, BI maintained the Deposit Facility rate at 2.75%, as well as the Lending Facility rate at 4.25%. BI stated that the decision is consistent with the low inflation projection and maintained rupiah stability, as well as efforts to strengthen the national economic recovery.”

“BI will also continue to optimize the accommodative monetary and macroprudential policy through various policy measures”¦”

“BI reiterated that the global financial volatility should ease as the Fed’s policy outlook becomes clearer. BI doesn’t expect that the Fed will start tapering its asset purchases until the first quarter of 2022.”

“With the current global development, we are in the view that BI has less room to trim its benchmark rate further. Nonetheless, BI will keep its accommodative monetary policy via other monetary, macroprudential, and liquidity-supporting measures to effectively transmit the lowering of the benchmark interest rate so far into the economy. We keep our BI rate forecast to stay at current level of 3.50% for the rest of the year.“