Following the Fed, BI Maintains Benchmark Interest Rate at 3.5%

The Bank Indonesia Board of Governors (RDG) meeting held on June 22-23, 2022, decided to maintain the benchmark interest rate, the BI 7-Day Reserve Repo Rate (BI7DRR), at 3.5%.

This is the 16th time the BI7DRR has been maintained at 3.5% since March 2020. This is also the lowest level of the benchmark interest rate since its implementation on August 19, 2016, as shown in the graph.

BI also set the deposit facility interest rate at 2.75% and the lending facility interest rate at 4.25%.

BI Governor Perry Warjijo stated that this decision is in line with the need to control inflation and maintain rupiah exchange rate stability. This step is also intended to support economic growth amid increasing external pressures related to the rising risk of stagflation in various countries.

“Bank Indonesia continues to monitor the risks of future inflationary pressures, including inflation expectations and their impact on core inflation, and will take further monetary policy normalization steps in accordance with developing data and conditions,” said Perry in BI's press release.

The following are Indonesia's macroeconomic conditions up to June 2022:

* Economic growth (Q1): 5.01%
* YoY Inflation (May): 3.55%
* Rupiah exchange rate (June 23): Rp14,833/US dollar

Previously, the United States Federal Reserve (The Fed) raised its benchmark interest rate by 75 basis points (bps) to the range of 1.5-1.75% on June 15, 2022. This step was taken to curb inflation, which reached 8.6% in May 2022.