Indonesia holds rates steady at 6.25%

Indonesia’s central bank, Bank Indonesia (BI), maintained its key interest rate at 6.25 per cent on Wednesday, as expected by analysts, Bloomberg reported.

Governor Perry Warjiyo emphasised a data-driven approach to future policy decisions, despite early signs of success from their April rate hike.

The decision to hold rates reflects confidence in Indonesia’s economic prospects, with inflation expected within the target range and growth forecast at 4.7 per cent-5.5 per cent for 2024.

Additionally, the rupiah has gained 1.7 per cent this month, making it one of the region’s top performers, as per the statement.

Warjiyo highlighted potential risks that may require additional measures, including the possibility of a more hawkish stance from the US Federal Reserve, leading to prolonged higher US interest rates and putting pressure on the rupiah.

The decision to hold rates was met with mixed reactions in the market.  While BI expressed confidence in the rupiah’s strength, both the five-year bond yield and the rupiah itself weakened slightly after the announcement.