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Indonesia Monetary Policy September 2023

Indonesia: Bank Indonesia stands pat in September, keeps an eye on the rupiah

As markets had anticipated, Bank Indonesia (BI) left the 7-day reverse repo rate unchanged at 5.75% for the eighth consecutive time at its monetary policy meeting on 20–21 September. The Bank also kept the deposit facility and lending facility rates at 5.00% and 6.50%, respectively.

Similarly to previous meetings, BI’s hold aimed to maintain the disinflationary trend and keep inflation within this year’s 2.0–4.0% target. In addition, the Bank stated its decision sought to shore up the rupiah in anticipation of “the contagion effect of global financial market uncertainty”. Meanwhile, BI will support economic activity through liquidity incentive policies effective from 1 October aimed at reviving lending and financing to businesses in the downstream, housing, tourism and green sectors.

The Bank did not provide explicit forward guidance in its communiqué. That said, in a separate briefing session, Central Bank Governor Perry Warjiyo stated that there is room to alter the interest rate policy as an uncertain global economy and a stronger U.S. dollar remain key risks to prices and FX stability. Consequently, BI’s monetary policy stance will likely remain unchanged in upcoming meetings: The majority of our panelists see rates ending 2023 around current levels.

The next monetary policy meeting is scheduled for 18–19 October.

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