Indonesia's July 2023 Benchmark Interest Rate Hold, Economy Viewed Positively

Economics & Macro

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Adi Ahdiat 25/07/2023 16:00 WIB

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Bank Indonesia held steady the benchmark BI 7-Day Reverse Repo Rate (BI7DRR) at 5.75% in July 2023. This decision was made amid what is considered a sound national economic condition.

Movement of the BI 7-Day Reverse Repo Rate (January 2018-July 2023)

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Indonesia's July 2023 Benchmark Interest Rate Hold, Economy Viewed Positively

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Movement of the BI 7-Day Reverse Repo Rate (January 2018-July 2023)

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Bank Indonesia (BI) maintained its benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI7DRR), at 5.75% in July 2023.

The Deposit Facility interest rate remains at 5.00%, and the Lending Facility interest rate at 6.50%. BI took this step amid a domestic economy considered to be stable.

"Indonesia's economic growth remains strong, supported by domestic demand. The domestic economy in Q2 2023 is projected to grow better than forecast, driven by increased household consumption and investment," BI stated in a press release on Tuesday (25/7/2023).

BI stated that national household consumption increased, mainly driven by rising public mobility, improved income expectations, controlled inflation, and the positive impact of National Religious Holidays (HBKN) and the 13th-month salary payment to Civil Servants (ASN).

However, BI anticipates a slowdown in goods exports in line with the weakening global economy, while service exports are growing strongly due to increased foreign tourist visits.

Despite the relatively strong domestic economy, BI views the global situation as unstable.

"Global economic uncertainty remains high. Global economic growth in 2023 is still projected at 2.7%, but with a shift in growth sources," said BI.

BI predicts that the growth of the United States (US) and several developed countries in Europe will be better than initially projected. However, China's economic growth is expected to be lower, in line with the stagnation of consumption and investment, particularly in the property sector.

BI also assesses that inflationary pressures in developed countries remain relatively high, which could lead to increases in monetary policy interest rates in developed countries, including the Federal Funds Rate (FFR).

"These developments are making capital flows to developing countries more selective and increasing exchange rate pressures in developing countries, including Indonesia, thus requiring a stronger policy response to mitigate global spillover risks," said BI.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."