Jakarta, CNBC Indonesia – Bank Indonesia (BI) has decided to increase the BI 7 Days Reverse Repo benchmark rate by 50 basis points (bps) to 4.25%, with the deposit rate at 3.5% and the loan rate at 5% .
This decision was made at the September 2022 BI Board of Governors meeting, Thursday (9/22/2022). The RDG was held over two days to determine the direction of interest rates and central bank monetary policy.
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“The Board of Governors meeting of Bank Indonesia on September 21-22, 2022 decided to increase the BI 7 Day Reverse Repo rate by 50 bps to 4.25%, the Deposit Facility interest rate to 3.5% and the Lending Facility interest rate at 5%, “BI Governor Perry Warjiyo said at a news conference.
The market consensus compiled by CNBC Indonesia predicts BI will raise the benchmark interest rate this month. Of the 14 institutions involved in forming the consensus, all agreed that the MH Thamrin camp would raise the benchmark interest rate.
A total of 12 institutions / institutions estimate that the central bank will increase BI7DRR by 25 basis points (bps) to 4.00% while two institutions / institutions expect BI7DRR to increase by 50bps to 4.25%.
For the record, BI surprisingly raised the benchmark interest rate by 25bps to 3.75% in August 2022. The increase was the first since November 2018 or in 44 months.
DBS economist Radhika Rao also said BI needs to raise interest rates to maintain inflation expectations. Inflation expectations are expected to rise after the government raised subsidized fuel prices on Sept. 2.
Indonesia’s general inflation reached 4.64% (yoy / y), while core inflation was recorded at 3.04% (yoy). Core inflation (y / y) was the highest since November 2019 (3.08%).
“The major concern right now is the continuing impact of rising fuel prices on inflation. Rising interest rates serve more to maintain domestic inflation expectations and not just follow the rising rate trend. interest rates, “Radhika said in his Macro Insights Weekly report: Can the global economy handle positive real rates ?.
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