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Indonesia Monetary Policy January 2020

Indonesia: Bank Indonesia keeps rates unchanged in January

At its 22–23 January monetary policy meeting, Bank Indonesia (BI) left the seven-day reverse repo rate unchanged at 5.00%, as had been expected by market analysts. The Bank also left the deposit facility and lending facility rates stable at 4.25% and 5.75% respectively. The decision to hold came after the Bank slashed rates last year in a bid to ward off an economic slowdown.

The decision to stay put was likely influenced by the brighter external environment, after the U.S. and China signed a trade deal in mid-January and global economic indicators showed encouraging signs at the end of last year. As such, BI felt there was no need to continue cutting rates to support the economy.

In its communiqué, the Bank reiterated that it would continue to opt for an “accommodative policy mix”, with Governor Perry Warjiyo commenting after the meeting that there was room for further rate cuts if required. Most FocusEconomics panelists see some further loosening by end-2020.

According to Nicholas Mapa, senior economist at ING: “With global growth only expected to post a modest recovery in 2020, we believe that the BI Governor will cut policy rates as early as the first quarter”.

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