Bank Indonesia Raises Reference Interest Rate by 25 Bps to 5.5% in December 2022

Bank Indonesia (BI) has again raised its benchmark interest rate by 25 basis points to 5.5%. The central bank is slowing the pace of interest rate hikes as inflation becomes more controlled, mirroring the steps taken by The Federal Reserve.

"The Bank Indonesia Board of Governors' meeting on December 21-22, 2022, decided to raise the BI 7-day reverse repo rate by 25 basis points to 5.5%," said BI Governor Perry Warjiyo in a press conference following the Board of Governors' meeting in August 2022, Thursday (22/12).

Perry Warjiyo explained that the more measured interest rate hike is a follow-up step to ensure, in a *front-loaded, pre-emptive*, and *forward-looking* manner, the continued decline in inflation expectations and inflation, so that core inflation remains within the range of 3.0±1%.

The interest rate for the deposit facility has been raised to 4.75%. Similarly, the lending facility rate has been raised to 6.25%. BI started raising interest rates in August 2022, maintaining the increases for 17 consecutive months.

BI has raised its benchmark interest rate by a total of 2% this year.

(read: Indonesia's Central Bank Interest Rate Relatively High in ASEAN in November 2022)