The Bank of Indonesia (BI) announced an increase in the 7-day reverse repurchase rate by 0.25% to 5.75% at its meeting on Wednesday (Jan 20). The move is aimed at maintaining a balance between reducing inflation and maintaining economic growth prospects, according to the bank.
Governor of BI said, “This rate hike is to reduce expectations of sustained inflation.”
The rate hike highlights BI’s continued focus on controlling inflation, which unexpectedly increased last month. This marks the second time in three months that BI has raised the interest rate, bringing the total increase to 2.25% since August last year. The move is also a response to concerns that inflation may continue to surpass BI’s 2%-4% target range as food and transportation costs rise ahead of Ramadan.
Despite this, BI has reaffirmed its 2023 gross domestic product (GDP) growth forecast in the mid-range of 4.5%-5.3%.