Bank Indonesia Holds Reference Interest Rate at 4.5%

Bank Indonesia (BI), in its Board of Governors Meeting (RDG) on May 18-19, 2020, decided to maintain the benchmark interest rate (BI 7-Day Reverse Repo Rate/BI7DRR) at 4.5%. The deposit facility interest rate and lending facility interest rate also remained unchanged at 3.75% and 5.25%, respectively.

This decision was made to maintain exchange rate stability amid uncertainty in the global financial market. The Indonesian Rupiah has gradually strengthened in line with easing global uncertainty and maintained confidence in Indonesia's economic conditions. Until May 18, 2020, the Rupiah had strengthened by 0.17% compared to the end of April, although it still experienced a 6.9% depreciation compared to the end of last year.

Furthermore, BI sees room for interest rate cuts given low inflationary pressure and the need to stimulate economic growth in 2020. Developments in April 2020 showed the risk of a global economic recession reflected in the contraction of various indicators, such as manufacturing and service sector performance, as well as consumer and business confidence. BI estimates that the global economy will record -2.2% growth in 2020. Meanwhile, the domestic economy will also decline, lower than the initial projection.