Bank Indonesia Raises Key Rate by 25 Bps to 6%

Annisa ayu artanti    •    15 November 2018 16:48 WIB
indonesian economy (en)
Bank Indonesia Raises Key Rate by 25 Bps to 6%
Illustration (Photo:MI/Usman Iskandar)

Jakarta: Bank Indonesia (BI) decided to increase its 7-Day Reverse Repo Rate by 25 basis points (bps) to 6.00 percent after a Board of Governors meeting on Thursday.

"While also raising the Deposit Facility (DF) and Lending Facility (LF) rates by 25 bps to 5.25% and 6.75% respectively," BI Governor Perry Warjiyo said.

In order to maintain flexibility and distribution of liquidity in the banking industry, Bank Indonesia raised the average reserve requirement (conventional and sharia) from 2% to 3%, as well as raising the macroprudential liquidity buffer (conventional and sharia) that can be repoed to Bank Indonesia, from 2% to 4%, each from deposit. 

"The decision reflects Bank Indonesia’s ongoing efforts to lower current account deficit within a manageable threshold," he said. 

"The policy rate hike is also aimed at strengthening the attractiveness of domestic financial markets by anticipating global policy rate hike in the next few months," he said.

Furthermore, Bank Indonesia has decided to maintain macroprudential policy without adjusting the countercyclical capital buffer (CCyB), namely remaining at 0%, and the Macroprudential Intermediation Ratio (MIR) in the 80-92% target range. 

Moving forward, Bank Indonesia will optimise its policy mix to safeguard macroeconomic and financial system stability, while strengthening policy coordination with the Government and other relevant authorities to maintain economic stability and bolster external resilience, which includes reducing the current account deficit to around 2.5% of GDP in 2019. 

"The policy mix instituted by Bank Indonesia and the Government is expected to effectively dampen the impact of global economic gyrations by leaning against the global headwinds in order to maintain domestic economic resilience," he said.


(WAH)