Wednesday, 20 October 2021 | 14:56 WIB

Why Bank Indonesia Keeps Its Benchmark Rate at 4.25 Percent

Why Bank Indonesia Keeps Its Benchmark Rate at 4.25 Percent (tobasatu)

JAKARTA, NNC - Bank Indonesia (BI) has kept its benchmark interest rate at 4.25 percent. Indonesia’s central bank does not follow the US Federal Reserve's policy to raise its benchmark interest rate by 25 basis points

BI said it has considered the Fed rate hike in its decision to make no changes to its benchmark rate. "The increase in the FFR interest rate in the US by 25 bps on December 13, 2017 is in line with Bank Indonesia's forecasts," said Dodi Budi Waluyo, Assistant Governor of BI on Economic and Monetary Policy at Bank Indonesia Building, Jakarta, Thursday (14/12/2017) .

The Fed rate hike does not directly affect BI's interest rate. The potential raising of BI interest rate is influenced by external as well as internal conditions.

"If the Fed increases its rates, it does not mean we have to immediately raise our rates without looking at the domestic targets. There are several factors we observe, including the the Fed, global oil prices, and also the geopolitical problems in China,” he explained.

To that end, he asserted that BI is set on keeping its interest rate at 4.25 percent. Because, Bank Indonesia has not seen any pressure on inflation and the current account is still pretty good.

"We do not need to adjust interest rates because there is no pressure on inflation in the future and the current account is still good so that the Rupiah is stable," he said.