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Bank of Indonesia Holds Policy Rate as Expected

On March 16, the Bank of Indonesia (BI) held its 7-day reverse repurchase rate steady at 5.75% during its meeting, stating that previous interest rate increases are sufficient to bring inflation back to the target later this year.

This decision aligns with the predictions of 30 economists in a survey conducted by Reuters.

BI Governor Perry Vargiyo reassured the public that the country’s commercial banks remain strong, despite potential risks arising from the overseas banking crisis. The government’s stress test results showed that Indonesian banks are capable of withstanding any potential risks.

Vargiyo also stated that the total interest rate increase of 2.25% during August was enough to ensure that headline inflation returns to the target range.

As of February, Indonesia’s headline inflation rose slightly to 5.47%. The BI’s decision to hold the policy rate is expected to have an impact on inflation rates in the future.

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