Indonesia C.Bank Keeps Rates Steady, as Expected

MACROECONOMICS - JAKARTA. Indonesia's central bank kept interest rates unchanged on Thursday, as expected, despite renewed volatility in the rupiah exchange rate, saying the current level is enough to control inflation.

Bank Indonesia (BI) left the benchmark 7-day reverse repurchase rate unchanged at 6.00%, as expected by a strong majority of economists polled by Reuters, following October's surprise rate hike. Its two other policy rates were also kept steady.

BI Governor Perry Warjiyo said the decision was consistent with maintaining the rupiah's stability and mitigating against imported inflation.

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The central bank has been juggling the need to support economic growth with pressure on the rupiah, which can affect domestic inflation.

BI expects inflation to stay within the central bank's target range this year and next, but is monitoring risks like high global energy prices and domestic food prices, as well as the rupiah exchange level, Warjiyo said.

Inflation in October picked up slightly to 2.56%, but remained within BI's 2% to 4% target range for this year. In 2024, BI has targeted inflation to be within a range of 1.5% to 3.5%.

"This 6% policy rate is still consistent to make sure next year's inflation is not higher than 3.2%," he told reporters.

The rupiah's exchange rate has been highly volatile against the U.S. dollar in the past few weeks, sensitive to swings in market sentiment about the Federal Reserve's tightening cycle.

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It posted its biggest one-day drop since February on Wednesday, but rebounded slightly on Thursday.

Even though Southeast Asia's largest economy has logged solid growth, annual expansion in the third quarter was at its slowest pace in two years at 4.94%, as exports shrank and household spending softened.