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Indonesia central bank holds rates, sees economic cycle past worst

23 January 2020 16:14 (UTC +04:00)

Indonesia’s central bank kept interest rates unchanged at its first policy meeting of the year, saying the country’s economic cycle had passed its lowest point though it left the door open for further “accommodative” policies when conditions allow, APA reports citing Reuters.

Bank Indonesia (BI) held the benchmark 7-day reverse repurchase rate IDCBRR=ECI unchanged at 5.00%, as expected by most of the analysts polled by Reuters, viewing current policy as conducive to anchoring inflation, supporting economic growth and maintaining financial market stability.

“The economic cycle in Indonesia has passed its lowest point and will continue to improve,” Governor Perry Warjiyo said, adding that upward momentum would be supported by global growth and higher export demand, including for Indonesian commodities.

Twenty-two out of 25 economists in a Reuters poll had expected BI to hold the key rate steady at 5.00% on Thursday, while only three had anticipated a 25 basis point cut.

BI had cut the key rates four times last year for a total of 100 basis points to help support sluggish economic growth. It has also cut bank reserve requirements and relaxed some lending rules to boost credit growth.

Loan growth, however, has remained stubbornly slow. Official data showed that loan growth slowed to 6.08% in December, the slowest pace since November 2009, according to Eikon Refinitiv data.

Warjiyo expects easing policies implemented last year to continue to trickle down to the banking system and start having an impact on loan growth, which he expects to improve to a 10%-12% growth rate in 2020.