Bank Indonesia maintained BI 7-days Reverse Repo Rate at 5.75%

As a core of monetary policy in Indonesia, Bank Indonesia need to maintain inflation in stable position. On the latest meeting on 16th February 2023, the board of Bank Indonesia decide to maintain central bank rate at 5.75%.

In order do decide interest rate, Bank Indonesia use system that called 7-days repo rate, it is a policy that common used in some of central bank around the world to decide interest rate that will be used by central bank to loan money to other commercial banks.

As state on Bank Indonesia Publication (2023) Bank Indonesia agreed to hold BI 7-days Reverse Repo Rete (BI7DRR) at 5.75%, because optimism that current rate is enough to maintain inflation that already been targeted at 3% overall until mid of 2023. The Rupiah stabilisation plan to control imported inflation has been strengthened by foreign exchange monetary operations using foreign exchange earnings of exports (DHE).

Monetary operation that implied by Bank Indonesia stabilize Rupiah in money market, as foreign exchange contributes to the inflation. Market intervention that conducts by central bank in both spot and Domestic Non Derivable Forward market maintained the strength of Rupiah.

Each monetary policy that given by Bank Indonesia gives impact both direct and indirect to Indonesia market, at announcement day.

Focus Economics (2023) also stated, The Bank's forward guidance remained subdued, implying that it will maintain the current monetary policy stance for the time being until core inflation returns to within the target range. Rates are also expected to remain similar to their present levels this year, according to our panel.

Reference:

Bank Indonesia (2023) BI 7-Day Reverse Repo Rate Held at 5.75%: Synergy Maintaining Stability and Reviving Growth. Available at: https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_253823.aspx (Accessed: February 22, 2023).

Focus Economics (2023) Indonesia BI 7-day reverse repo rate (%, EOP), Focus Economics. Available at: https://www.focus-economics.com/country-indicator/indonesia/interest-rate (Accessed: February 22, 2023).