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Indonesia: Central Bank stands pat in September

Christian Fernsby |
At its monetary policy meeting held on 20–21 September, Bank Indonesia (BI) decided to leave the seven day reverse repo rate at the all-time low of 3.50%, where it has been since February.

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The move was widely expected by market analysts.

The Bank’s decision to stand pat was motivated by its commitment to support the local currency as well as the recovery, which is expected to have resumed following a slowdown in July amid spiking daily Covid-19 infections and the reintroduction of restrictions.

Meanwhile, price pressures are limited, with inflation remaining below 2.0% in July–August, providing the Bank with room to maintain its accommodative stance. That said, BI expects the headline reading to return to and remain within the 2.0%–4.0% target range going forward.

Looking ahead, BI maintained its dovish tone in its communiqué, pledging to stick to a supportive monetary stance and reiterating its commitment to “maintain macroeconomic and financial system stability and support further economic improvement efforts”. All of our panelists see the seven-day reserve repo rate ending 2021 at 3.50%.

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