Bank Indonesia's benchmark interest rate increased to 5.75% in January 2023.

The Bank Indonesia (BI) Board of Governors' meeting on January 18-19, 2023, decided to raise the BI 7-Day Reverse Repo Rate (BI7DRR) benchmark interest rate by 25 basis points (bps) to 5.75%.

Consequently, the deposit facility interest rate increased by 25 bps to 5%, and the lending facility interest rate also rose by 25 bps to 6.5%.

BI Governor Perry Warjiyo stated that this interest rate hike is a measure to curb domestic inflation. Although lower than in other countries, Indonesian inflation remains above 3%.

"This policy aims to ensure core inflation remains within the range of 3% plus or minus 1% in the first half of 2023," Perry said, as quoted by Katadata.co.id on Thursday (19/1/2023).

The central bank is optimistic that the interest rate hike will bring general inflation back down to the range of 2% to 4% in the second half of this year. Policies to stabilize the Rupiah exchange rate will also be implemented to control imported goods.

Perry also ensured that this interest rate increase will strengthen the policy mix response to maintain stability and the momentum of economic recovery.

According to Perry, Indonesia's economic recovery continues at the beginning of this year, driven by domestic demand, which is expected to strengthen further.

"In 2023, Indonesia's economic growth is expected to continue, although it will slow slightly to the midpoint of the 4.5% to 5.3% range, in line with the slowing global economy," Perry said.