Global Economy Slows, BI Maintains Reference Interest Rate at 3.5%

Bank Indonesia (BI) has again maintained its benchmark interest rate (BI 7-Day Reverse Repo Rate/BI7DRR) at 3.5%. This is the ninth time since February 2021.

BI also maintained the deposit facility interest rate at 2.75%. Furthermore, the lending facility interest rate remains at 4.25%.

The central bank's decision to maintain the benchmark interest rate aims to safeguard the stability of the rupiah exchange rate and the financial system amid projections of low inflation. In addition, this step is an effort to support national economic growth.

Currently, BI assesses that inflation and the rupiah exchange rate are well-maintained. The domestic economy is also expected to continue growing in Q4 2021, resulting in an overall annual growth of around 3.5%-4.3%.

However, Indonesia needs to be cautious because the projected global economic recovery is lower than previously estimated. The economic growth of several major countries, such as the United States (US), China, and Japan, is lower than anticipated.

This is in line with the increasing transmission of the Delta variant of the Covid-19 virus in various parts of the world. In addition, there are disruptions to global supply and energy chains.

On the other hand, uncertainty in the global financial market has slightly decreased amid concerns about faster global monetary policy tightening as inflation rises. This condition has led to the continuation of global portfolio flows into developing countries, especially those with attractive financial asset returns and improving economic conditions.