Rupiah Pressure Eases, BI Holds Reference Interest Rate at 5.75%

The Bank Indonesia (BI) Governor's meeting held on October 22-23 decided to maintain the benchmark interest rate (BI 7-day Reserve Repo Rate) at 5.75%. The easing pressure on the Rupiah is one of the reasons for the central bank to maintain its benchmark interest rate. The Rupiah exchange rate on Wednesday (October 24) was traded at Rp 15,189 per US dollar, slightly strengthening from the previous day's closing position of Rp 15,192 per US dollar.

BI's decision to maintain the BI 7-day rate aims to reduce the current account deficit (CAD) within safe limits and maintain the attractiveness of the domestic financial market. Furthermore, it aims to strengthen external resilience amidst the ongoing high uncertainty in the global financial market. As is known, Indonesia's current account deficit in the second quarter of this year reached US$8.03 billion or 3.04% of GDP.

Since May 2018, BI has raised its benchmark interest rate five times, or by 150 basis points (bps). The US Federal Reserve (The Fed) raising its benchmark interest rate due to the improving US economy and high inflation caused regional currencies, including the Rupiah, to weaken. To curb the Rupiah's depreciation, BI and other central banks also raised their benchmark interest rates.