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Inflation Still Below Target, BI Holds Interest Rate at 5.75% in May 2023

Adi Ahdiat 26/05/2023 10:31 WIB

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Bank Indonesia maintained the benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI7DRR), at 5.75% in May 2023. This step was taken to curb domestic inflation.

Movements of Bank Indonesia's Reference Interest Rate (January 2018 - May 2023)

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Movements of Bank Indonesia's Reference Interest Rate (January 2018 - May 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 May 2023. This step was taken to curb domestic inflation.

"The decision to maintain the BI7DRR at 5.75% is consistent with the monetary policy stance to ensure core inflation remains controlled within the range of 3.0±1% for the remainder of 2023," BI stated in its press release on Thursday, May 25, 2023.

"The policy focus is directed towards strengthening rupiah stability to control imported inflation and mitigate the spillover effects of global financial market uncertainty," it continued.

According to the Central Statistics Agency (BPS) report, Indonesia experienced 4.33% year-on-year (yoy) inflation in April 2023.

Domestic inflation has been trending downwards since March 2023 and is increasingly approaching BI's target of suppressing inflation to the 3.0±1% range this year.

In May 2023, BI stated it would maintain loose liquidity and macroprudential policies to encourage credit/financing disbursement and maintain financial system stability.

Overall, BI also stated that the Indonesian economy remained strong in the January-March 2023 period.

"Economic growth in Q1 2023 was recorded at 5.03% (yoy), slightly higher than the growth in the previous quarter of 5.01% (yoy)," BI said.

"This positive development was driven by high exports and increased domestic demand, in line with increased household and government consumption, as well as robust non-building investment," it continued.

However, BI assessed that the global economy is still overshadowed by uncertainty.

"Global financial market uncertainty remains high, influenced by the impact of financial system stability risks in developed countries, and also the uncertainty surrounding the resolution of the government debt ceiling issue in the United States," BI stated.

"Amidst this global financial market uncertainty, foreign capital inflows into developing countries continue, in line with their better economic conditions and prospects," it continued.

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."