BI Not Hesitant to Readjust Key Rate

Bank Indonesia (BI) Governor Agus Martowardojo said that the central bank is prepared to apply a stronger monetary policy, including readjusting its key interest rate, to maintain the economic stability in the rest of the year.

“If we issue a policy mix as we are doing it now, (looking ahead), if the condition requires us to readjust it, we will not hesitate to do so,” he stated at a press conference here on Thursday.

At the meeting of the board of governors earlier in the day, BI raised its key interest rate “7-Day Reverse Repo Rate” by 25 basis points (bps) to 4.5 percent.

The central bank also raised deposit facility rate by 25 bps to 3.75 percent, and lending facility rate by 25 bps to 5.25 percent.

After tightening its key interest rate policy in May 2018, Agus Martowardojo remarked that the direction of BI monetary policy is neutral. BI still maintains its economic growth target at a range of 5.1-5.5 percent for this year.

He added that the key interest rate hike is also a BI policy mix to restore the domestic economic stability and prevent the rupiah from falling deeper. If the rupiah`s depreciation continues, it will threaten the domestic inflation projected at 2.5-4.5 percent year-on-year.

“In many things, BI is eager to believe that depreciation or expected depreciation that may bring about risk to the inflation,” he noted.

The rupiah lost 2.06 percent against the US dollar from January to April this year (year to date).

Hopefully, the key interest rate hike will help maintain the investment climate, so that foreign capital would return to the domestic financial market.

Courtesy : Antaranews.com
Photo : Radar Lampung

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