VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

The Bank Indonesia (BI) Board of Governors Meeting on 17-18 March 2021 decided to keep the benchmark interest rate, or the BI 7-Day Reverse Repo Rate at 3.5 percent. On February 18, BI announced a cut in interest rates from 3.75 percent to 3.5 percent. Since the beginning of last year, BI has cut its benchmark interest rate by 150 basis points (bps). This 3.5 percent figure is the lowest interest rate of BI in the history since Indonesia’s independence.

According to Governor of the Central Bank (BI), Perry Warjiyo, this decision is in line with the need to maintain the stability of the Rupiah exchange rate from the increasing uncertainty of global financial markets, amid the predicted low inflation. In addition, BI also maintains the Deposit Facility rate at 2.75 percent and the Lending Facility rate at 4.25 percent as the economic recovery process continues.

To support the sustainability of the national economic recovery, Bank Indonesia will also further optimize accommodative macro-prudential policies, accelerate money market deepening, support international policies, and digitize the payment system. In line with this, BI is taking policy steps as a follow-up to the synergy of the Financial System Stability Committee's policies in an Integrated Policy Package for Increasing Business Financing. In addition, it continues to strengthen policy coordination with the Government to accelerate the distribution of credit / financing from banks to the business world, especially in priority sectors that support economic growth in the context of national economic recovery.

The statement from the US Central Bank (Federal Reserve) regarding no indication of raising the benchmark interest rate until 2023 is a breath of fresh air for currency movements in developing countries, including Indonesia. If Bank Indonesia follows this step, the Rupiah is expected to strengthen again this year after being under enough pressure throughout 2020. Thus, it is hoped that the process of economic recovery can be faster.