Dana Kemanusiaan Kompas
Nama & Peristiwa
BI Raises Reference Rate, Inflation Subsides
The inflation rate, which rose precipitously in previous months due to increasing prices of fuel and imported goods, has begun to subside. Bank Indonesia (BI) again raised its benchmark interest rate by 25 basis points.
Raising Interest Rates, BI Steps on the Brakes Early
Bank Indonesia has decided to raise interest rates early as a preemptive measure to cope with inflation in the event of an increase in fuel and food prices.
BI’s Monetary Policy Becomes More Independent
With the decline in the Fed’s influence on the stability of the rupiah exchange rate, BI's monetary policy can focus more on controlling inflation while continuing to encourage national economic recovery.
BI Still has Room to Maintain Interest Rates
Indonesia's foreign exchange reserves are in a strong position to maintain the stability of the rupiah exchange rate. As of 31 March 2022, the value of Indonesia's foreign exchange reserves was US$139.12 billion.
Lower Interest Rate Expected to Accelerate Economic Recovery
Bank Indonesia (BI) is optimistic that the lower benchmark interest rate can accelerate the recovery of the national economy, which has been severely affected by the COVID-19 pandemic.
Time to Lower Interest Rate
Despite the issue of the current account deficit, the central bank has decided to cut its benchmark interest rate in an effort to drive the domestic economy. Bank Indonesia has hinted at the possibility of cutting the interest rate.
BI Keeps Financial Market Attractive
Bank Indonesia and the government have continued to try to reduce the current account deficit and to maintain the attractiveness of the financial market. An increase in BI\'s benchmark interest rate will be followed by a rise in the lending rates of the domestic bank.
Normalizing Interest Rate
Last week, the rupiah strengthened against the US dollar over three to four consecutive days, giving fresh hope that Bank Indonesia would not raise its benchmark interest rate (the 7-Day Reverse Repo Rate) during the board of governors meeting this week.
Interest Rate Hike Could Become the Short-Term Solution
The Indonesian currency has been fluctuating between Rp 14,800 and Rp 14,900 per US dollar for the past two weeks. As the solution, BI needs to immediately raise the benchmark interest rate in order to halt the outflow of foreign funds and lure them back into the country.
Interest Rate Dilemma
Where does the dilemma truly lie? Previously, BI 7 DRRR has increased twice, by 25 bps each, in two consecutive weeks: on May 17 and again on May 30. At the time, the reference rate was 4.75 percent. On the one hand, by increasing its reference rate, BI wants to withhold capital outflow from the local financial market.