Bank Indonesia Raises Key Rate To 5.75% To Tame Inflation

(RTTNews) - Indonesia's central bank decided to raise its key interest rate for the sixth policy session at its January meeting, to ensure headline inflation remains within the target range of 2 percent to 4 percent in the second half of the year.

The Board of Governors, headed by Perry Warjiyo, hiked the BI 7-day reverse repo rate by 25 bps to 5.75 percent, the Bank Indonesia said on Thursday.

In December, the central bank had raised interest rates by the same 25 basis points.   The deposit facility rate was also raised by a quarter-point to 5.00 percent and the lending facility rate to 6.50 percent.

By raising interest rates in a measured manner, the bank aims to ensure a continued decline in inflation and inflation expectations so that core inflation is maintained within the range of 3.0 percent to 1.0 percent in the second half of 2023.

The bank observed that the improvement in Indonesia's economic growth continues to be driven by the increasingly strong domestic demand. 

Economic growth is predicted to continue in 2023, although it will slow slightly to the midpoint of the 4.5 percent to 5.3 percent range, in line with a declining global growth outlook.