BANK INDONESIA / BI - JAKARTA. Indonesia's central bank kept interest rates unchanged at its first policy meeting of the year, noting the country's economic cycle had past its lowest point though it left the door open for further "accommodative" policies when conditions allow.
Bank Indonesia (BI) held the benchmark 7-day reverse repurchase rate unchanged at 5.00%, as expected by most of the analysts polled by Reuters, viewing current policy as conducive to anchoring inflation, supporting economic growth and maintaining financial market stability.
"The economic cycle in Indonesia has passed its lowest point and will continue to improve," Governor Perry Warjiyo said, adding that upward momentum would be supported by global growth and higher export demand, including for Indonesian commodities.
Twenty-two out of 25 economists in a Reuters poll had expected BI to hold the key rate steady at 5.00% on Thursday, while only three had anticipated a 25 basis point cut.
BI had cut the key rates four times last year for a total of 100 basis points to help support sluggish economic growth. It has also cut bank reserve requirements and relaxed some lending rules to boost credit growth.
Loan growth, however, has remained stubbornly slow. Official data showed that loan growth slowed to 6.08% in December, the slowest pace since November 2009, according to Eikon Refinitiv data.
Warjiyo expects easing policies implemented last year to continue to trickle down to the banking system and start having an impact on loan growth, which he expects to improve to a 10%-12% growth rate in 2020.
TARGET GROWTH
Bank Indonesia is confident economic expansion will improve to 5.3% in 2020, up from around an estimated 5.1% for 2019, still Warjiyo said all policy instruments would be geared toward supporting economic growth.
"Our view is for the central bank to have room for another 25 bp cut in 2020, provided that other regional central banks opt for easing as well," Bank Danamon economist Wisnu Wardana said in a note.
Meanwhile, Indonesia's economic growth and more stable global financial markets have supported capital inflows into the country so far this year, underpinning the rupiah.
Warjiyo said the rupiah's level remained in line with fundamentals and expected it to remain stable.
The rupiah has gained around 1.9% against the dollar so far this year, making it the top gainer among emerging Asian currencies.
