By Kimberley Kao
SINGAPORE--Indonesia's central bank stood pat at its May policy meeting, as widely expected as it keeps an eye on rupiah stability and inflation against a backdrop of macroeconomic challenges.
Bank Indonesia kept its benchmark seven-day reverse repo rate at 6.25%. All seven economists polled by The Wall Street Journal had expected the decision.
The central bank also held its overnight deposit facility rate at 5.50% and its lending facility rate at 7.0%.
The decision is consistent with the bank's pre-emptive, forward-looking stance to ensure inflation stays in check, and the currency stable, the central bank said.
Economists largely expect the central bank to move cautiously after a surprise rate hike in April to stabilize a tumbling currency. While Bank Indonesia will likely be wary about starting its rate-cutting cycle too soon and risk adding more depreciation pressure on the rupiah. On the other hand, keeping policy settings too tight for too long could hinder growth, restricting domestic demand that has been key engine for the economy.
For now, it seems policy makers are comfortable with the current policy settings.
"Inflation has stabilised around the 3% mark within the [central bank's] target. while a broad dollar pullback has helped trim the year-to-date weakness in the rupiah," DBS economists wrote in a note.
A stable currency and a favorable mix of domestic developments lowers the need to tighten policy further and provides more headroom to watch for global cues, they add.
"We expect the sudden rate hike in April meeting to be the last hike by BI for this year," the UOB Global Economics & Markets Research team wrote in a note. "We maintain our forecast for BI rate for the rest of 2024 to remain at 6.25% as uncertainty remains high."
Write to Kimberley Kao at kimberley.kao@wsj.com
(END) Dow Jones Newswires
05-22-24 0355ET
