Bank Indonesia keeps rates steady, focuses on rupiah stability
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JAKARTA, Dec 17 : Indonesia's central bank held its policy rates unchanged for a third straight meeting on Wednesday, maintaining its focus on supporting the rupiah currency while it makes efforts to strengthen the impact of its earlier easings.
Bank Indonesia kept the benchmark 7-day reverse repurchase rate at 4.75 per cent, as expected by 18 of 31 economists polled by Reuters. The rest had predicted BI would resume its rate-cut cycle. The bank also left unchanged its other main policy rates.
BI had slashed its main rates by a total of 150 bps between September 2024 and September 2025 as it looked to stimulate growth in Southeast Asia's biggest economy.
Central bank Governor Perry Warjiyo said the decision was in line with efforts to maintain the stability of the rupiah as global market uncertainties remained high.
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The central bank has room for further policy easing given the low inflation outlook in 2026 and the need to boost economic growth, he said.
"We will evaluate the magnitude of the easing and its timing from month to month through assessments of inflation, economic growth, exchange rate stability, and other monetary conditions," he said.
Warjiyo said BI will also continue to expand liquidity in the financial markets, aiming to keep the base money supply growth in the double digits.
BI has forecast growth of 4.9 per cent to 5.7 per cent next year, from 4.7 per cent to 5.5 per cent in 2025.
To get banks to lower lending rates, BI has since Tuesday tweaked its liquidity incentive policy. Banks that reduce lending rates more aggressively will be allowed more reduction in their required reserves.
RUPIAH
The rupiah has been among emerging Asia's weakest currencies against the dollar this year. On Wednesday, it erased an earlier loss to post a slim gain of 0.03 per cent after BI's policy rate decision.
Warjiyo reiterated BI's commitment to intervening to defend the rupiah in offshore as well as domestic non-deliverable forward markets and spot foreign exchange market next year.
Hoping to increase domestic U.S. dollar supply to bolster the rupiah, the government has also said it would change export earnings retention rules to make exporters keep their dollars onshore for longer from next year.
While the expectation of low inflation next year will give BI more room for easing, concerns over rupiah stability may limit that flexibility, Bank Permata economist Faisal Rachman said.
"We estimate cumulative easing of no more than 50bps, and it could be lower if (rupiah) stability pressures persist longer than previously anticipated," he said.
Inflation has remained comfortably within the central bank's 1.5 per cent to 3.5 per cent target range for most of the year, with the November rate at 2.72 per cent. BI expects inflation to stay anchored next year.
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