Bank Indonesia Holds BI 7-Day Reverse Repo Rate at 5.75%

Source: Dimas Ardian/Bloomberg

Bank Indonesia (BI) has opted to maintain the BI 7-Day Reverse Repo Rate (BI7DRR) at its current level of 5.75%. Alongside this decision, the Deposit Facility rate remains at 5.00%, while the Lending Facility rate stands at 6.50%.

Announced by BI Governor Perry Warjiyo following the Board of Governors Meeting (RDG) in a press conference held on Tuesday, July 25, 2023, this stance is part of the central bank’s concerted efforts to steer monetary policy in line with its inflation targets and broader economic objectives.

In explaining the rationale behind the decision, Governor Perry Warjiyo emphasized that maintaining the BI 7-Day Reverse Repo Rate at 5.75% aligns with the ongoing monetary policy stance, carefully calibrated to ensure that inflation remains on track to achieve the target of 3% plus minus 1% for the remainder of 2023 and 2.5% plus minus 1% for the following year, 2024.

This strategic approach underscores the central bank’s commitment to maintaining price stability while fostering sustainable economic growth and financial stability in the face of both domestic and global economic uncertainties.

Governor Warjiyo further highlighted the central bank’s multifaceted focus in monetary policy implementation. A key area of attention centers on bolstering the value of the Indonesian rupiah, an essential component in managing inflationary pressures, particularly in regard to imported inflation. With the global financial market landscape experiencing bouts of volatility and uncertainty, Bank Indonesia’s strategic focus on mitigating potential spillover effects from external shocks takes center stage in its monetary policy considerations.

Furthermore, Bank Indonesia is actively supporting macroeconomic incentives that aim to stimulate credit demand in specific sectors, strategically targeting the downstream industries, housing sector, tourism, inclusive financing, and environmentally friendly projects. This concerted effort to enhance credit availability in these sectors is designed to bolster economic expansion, foster job creation, and propel Indonesia towards a more sustainable and inclusive growth trajectory.

In line with Indonesia’s vision for a digitally-driven future, Bank Indonesia is placing increased emphasis on the acceleration of digital payment systems. This push towards the adoption of digital financial services is driven by the objective of promoting greater economic and financial inclusion, bringing underbanked segments of the population into the formal financial system.

Simultaneously, the central bank remains steadfast in its commitment to enhancing the resilience of the financial system through a comprehensive mix of macroprudential policies and a robust payment infrastructure that will pave the way for a vibrant and sustainable economy.

As the nation’s central bank continues to navigate a dynamic and evolving economic landscape, the decisions taken in the RDG reflect the interplay of diverse considerations and the pursuit of a balanced and calibrated approach to monetary policy. Bank Indonesia’s commitment to maintaining monetary stability, fostering economic growth, and enhancing financial inclusion remains at the forefront of its endeavors as it steers Indonesia towards a more prosperous and resilient future.