JAKARTA, 21st August, 2024 (WAM) -- Indonesia’s central bank held its benchmark interest rate steady as expected, a decision that shows policymakers are not ready to be swayed into easing yet by the rupiah’s (Indonesian currency) recent rally.
Bloomberg reported that Bank Indonesia left the BI-Rate unchanged for a fourth straight month at 6.25 percent Wednesday, the highest level since the benchmark was introduced in 2016. That is in line with the forecast of 34 of the 36 economists surveyed by Bloomberg, with the rest expecting a 25 basis-point cut.
The rupiah is stronger in line with easing uncertainty, Governor Perry Warjiyo told reporters. Still, global developments call for some vigilance, he added.
While the rupiah has erased its loss this year against the dollar, the rate-setters are awaiting greater clarity from the US Federal Reserve about its easing path before driving domestic borrowing costs down. Also, policymakers are cautious about lingering external risks that could abruptly reverse foreign capital inflows.
The Indonesian rupiah has rallied nearly 5 percent this month to be among the top performers in Asia as investors ploughed US$1.5 billion into the nation’s bond market in August, according to data compiled by Bloomberg.
Firmer signals on a possible US rate cut next month have tempered dollar strength, while waning investor concerns over President-elect Prabowo Subianto’s fiscal policy helped in driving foreign inflows back to domestic assets.