News - 23 October 2018

No strong reason for BI to increase key rate next month: CORE


Center of Reform on Economics (Core) Indonesia research director Piter Abdullah has said there is no strong reason for Bank Indonesia (BI) to increase its benchmark seven-day reserve repo rate during its board of governors meeting early next month

“If BI increases the rate, it will narrow the room for the central bank to increase the key rate in the future, while the United States Federal Reserve is expected to increase its rate later this year,” said Piter in Jakarta on Monday as reported by

He added that the central Bank did not need to increase its rate following the slight trade surplus in September, and furthermore the rupiah exchange rate against the United States dollar was also relatively controllable, even though it was still under pressure.

Meanwhile, the inflation rate was also still low, at 1.78 percent from January to September year-to-date (ytd) and 2.87 percent year-on-year (yoy) and the whole-year inflation is expected to be lower than 3.5 percent, Piter added.

In the previous BI’s board of governors meeting in late September, the central bank decided to increase its policy rate by 25 basis points (bps) to 5.75 percent, following the Fed’s move to raise its policy rate.

The BI move was designed to help the stabilize rupiah exchange rate, which had depreciated 9.82 percent since January, according to the central bank. (bbn)

Source: The Jakarta Post

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