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1st LD Writethru: Indonesia keeps benchmark repo rate unchanged

Xinhua, August 19, 2016 Adjust font size:

Indonesian central bank held its new benchmark seven-day reverse repo rate steady at 5.25 percent for the second consecutive month, as the lender maintains capital-inflow momentum while waiting for opportunity to apply easing policy.

The governor board meeting on Friday evening decided to keep the rate unchanged, said Governor of Central Bank Agus Martowardojo.

The rate was firstly used as benchmark on Friday, replacing a 12-month reference rate.

The board also held deposit facility rate unchanged at 4.5 percent and cut lending facility rate to 6 percent from 7 percent, Martowardojo said.

"The decision is in line with the macroeconomic stability amid weakening global economy," Martowardojo said at the bank headquarters.

He said the lender may resume easing policy to help spur economic growth as inflation has been in check and rupiah has appreciated again the U.S. dollar.

The lender expects consumer price index to accelerate 3 to 5 percent this year.

Indonesia has started receiving capital inflows, which are expected to rise sharply in coming months after the country endorsed a tax amnesty law in June, bolstering shares in the sectors of banking, property and infrastructure at the Jakarta stock market.

The monetary-policy makers have decided to remove the 12-month reference rate and replaced it with the seven-day repo rate in a bid to speed up the effect of their policy on the banking sector, particularly on the effort to accelerate banking credit growth which had been subdued in recent months.

Indonesian central bank has aggressively slashed its basic rate by 100 points to 6.5 percent this year as it aims to help spur economic expansion.

The recent U.S. Fed Reserve's FOMC meeting was divided, which leads the Indonesian policy makers could not rule out the possibility of hawkish stance of the U.S. policy makers.

However, lowered expectation of global economic growth and Brexit counter such possibility.

At domestic, the Indonesian government has strengthened its rupiah assumption against the greenback for this year from 13,500 to 13,300, as the nation is striving to lure foreign investment.

Going forward, the bank needs to maintain its policy in line with the rupiah assumption amid the prospects of a huge influx of capital inflows.

The central bank estimates the economy to expand 4.9 to 5.3 percent this year. Endit