BI follows Fed, raises key rate to 5.75 percent

Bank Indonesia (BI) decided to hold its key rate in July as it remained confident that the current rate is still attractive to foreign investors amid uncertainties in the global liquidity market.

Following a two-day board of governors meeting, the central bank announced that the BI seven-day reverse repo rate was maintained at 5.25 percent, while lending facility and deposit facility rates stayed at 6 percent and 4.5 percent, respectively.

“The decision was consistent with Bank Indonesia’s effort to keep the domestic financial market attractive amid high uncertainties in the global financial market,” BI Governor Perry Warjiyo said in Jakarta on Thursday.

He added that the previous 100-basis-point (bps) rate hike, taken by the central bank in the last three policy meetings since May, had provided room for foreign capital inflows.

BI believes the current rate will also maintain the rupiah’s stability.

Perry said the central bank’s monetary policy stance remains hawkish despite no rate hike in June, adding that BI remains “preemptive, frontloading and ahead of the curve” in directing its monetary policy toward stability.

He added that the central bank also went the extra mile to boost the domestic financial market’s attractiveness for portfolio investors, including its plan to expand investment options for investors by reintroducing central bank certificates (SBI) with nine-and 12-month maturities. (bbn)

The Jakarta Post

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