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Indonesia Central Bank Holds Rates Amid Tapering Uncertainty, Omicron

Kamis, 16 Desember 2021 / 15:23 WIB
Indonesia Central Bank Holds Rates Amid Tapering Uncertainty, Omicron
ILUSTRASI. Bank Indonesia's logo is seen at Bank Indonesia headquarters in Jakarta

Reporter: Anna Suci Perwitasari | Editor: Anna Suci Perwitasari

KONTAN.CO.ID - JAKARTA. Indonesia's central bank kept interest rates at record lows on Thursday to support the economy's recovery from the COVID-19 pandemic amid uncertainty around the new Omicron variant and the Federal Reserve's plans for a quicker bond tapering.

Bank Indonesia (BI) left the 7-day reverse repurchase rate at 3.50%, where it has been since February. The decision was expected by all economists polled by Reuters. BI also kept its two other main policy rates steady.

The central bank said the decision was in line with the need to support the economic recovery amid a low inflation outlook, while keeping the rupiah stable amid global market uncertainty.

Governor Perry Warjiyo reiterated BI's plan to shift its monetary stance towards "pro-stability" next year from "pro-growth" currently, under which it has cut rates by a total of 150 basis points since the pandemic started and pumped billions of dollars of liquidity into financial markets.

But he also flagged global market uncertainty from the spread of the Omicron coronavirus variant and the pace of the U.S. Federal Reserve's tapering.

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The rates decision came after the Fed announced overnight it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage point interest rates hike by end-2022.

The governor has said BI will begin to reduce excess liquidity in the market next year and will consider raising rates at the end of 2022.

Warjiyo expected growth to improve in the fourth quarter as mobility rises, projecting growth of more than 4.5%.

Indonesia's economic growth slowed more than expected in the third quarter as restrictions to control a deadly wave of COVID-19, triggered by the Delta variant, weighed on activity.

Recent data suggested activity has rebounded since restrictions were eased from August, but the risk of another infection wave remains as Indonesia reported the first case of the Omicron variant on Thursday.

Inflation rose to 1.75% in November - the highest since June 2020 - but was below BI's 2%-4% target range. BI reiterated inflation will return to within its target range next year.

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