Indonesia increases benchmark interest rate by 25 bps to 5.50 pct

Benchmark interest rate of Bank Indonesia was raised as a follow-up measure to ensure the continued decline in inflation expectation and inflation so that core inflation is maintained within the range of 3.0 ± 1 percent.

 

Jakarta (Indonesia Window) – Bank Indonesia (BI)’s Board of Governors Meeting on Dec. 21-22, 2022 decided to increase the BI 7-Day Reverse Repo Rate (BI benchmark interest rate) by 25 basis points (bps) to 5.50 percent, BI’s Governor Perry Warjiyo said.

The deposit facility interest rate rises by 25 bps to 4.75 percent, and the lending facility rate is by 25 bps to 6.25 percent, Perry told a press conference on Thursday.

Benchmark interest rate was raised as a follow-up measure to ensure the continued decline in inflation expectation and inflation so that core inflation is maintained within the range of 3.0 ± 1 percent.

Meanwhile, Head of BI’s Communications Department Erwin Haryono said the rupiah exchange rate stabilization policy would continue to be strengthened to control imported inflation in addition to mitigating the spillover impact of the still strong U.S. dollar and still high uncertainty on global financial markets.

Affirming the direction of Bank Indonesia’s policy mix for 2023 as stated at the 2022 Bank Indonesia Annual Meeting on Dec. 30, 2022, the monetary policy for 2023 would remain focused on maintaining stability (pro-stability), while the macro-prudential policy, the digitalization of the payment system, deepening of money markets, as well as inclusive and green economic and financial programs are continuously directed to encourage growth (pro-growth).

Bank Indonesia (the central bank) continues to push for an increase in the payment system efficiency by strengthening policies and accelerating digitalization to maintain the momentum of economic recovery, Erwin said in his official statement on Thursday.

Digital economic and financial transactions have increased as they are supported by increasing public acceptance and preference for online shopping, the breadth and ease of digital payment systems, and the speed of digital banking.

The value of electronic money transactions in November 2022 grew 12.84 percent on an annual basis (year-on-year/yoy), reaching 35.3 trillion rupiahs while the value of digital banking transactions increased 13.88 percent (yoy) to 4,561.2 trillion rupiahs in line with the normalization of people’s mobility.

In addition, the value of payment transactions using ATM cards, debit cards and credit cards also increased by 16.85 percent (yoy) to 664.9 trillion rupiahs.

Meanwhile, the amount of currency in circulation in November 2022 increased by 7.77 percent (yoy), reaching 935.2 trillion rupiahs.

Bank Indonesia continues to ensure the availability of quality rupiah currency throughout Indonesia and ensures the smooth running of the national payment system in anticipation of Christmas and New Year moments.

*1 U.S. dollars = 15,560 rupiahs

Reporting by Indonesia Window