The Magazine for Asian Investors
Indonesia’s central bank kept its key interest rate at a record low, even though most central banks have raised rates to curb inflation.
The Indonesian central bank left the interest rate for 7-day bond repurchases unchanged at 3.50%.
Indonesia’s central bank is one of the few Asian central banks that has not raised interest rates since the coronavirus pandemic. Meanwhile, analysts warned that further rate hikes would widen the gap between Indonesia’s interest rates and those of other countries. This would reduce the attractiveness of Indonesian assets and increase downward pressure on the rupiah.
The governor of Indonesia’s central bank said the rupiah is likely to appreciate. The reason for this is said to be strong exports and a current account surplus this year.
In addition, the central bank will accelerate the normalization of its monetary policy while pushing for an increase in government bond yields to reduce inflation risk.