Jakarta ● Fri, June 24 2022
The United States Federal Reserve's rate increase of 75 basis points on June 15 and its indication of another three-quarter-point hike in July still did not cause Bank Indonesia (BI) to budge and raise its policy rate, thereby bucking the money-tightening trend around the world to fight inflation. BI instead still intends to focus on sustaining the post-pandemic economic recovery as inflationary pressures still come mostly from supply gaps and not from demand.
The BI Board of Governors Meeting agreed on Thursday to hold the BI seven-day reverse repo rate at 3.5 percent, while also maintaining the deposit facility (DF) rates at 2.7 percent and lending facility (LF) rates at 4.25 percent.
But most analysts expect a rate hike of at least 25 basis points next month or sometime in the second half, otherwise the rupiah will come under stronger pressure as the pace of capital outflows escalate with all its negative repercussions, including stronger imported inflationary pressures.
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