Bank Indonesia Increases BI7DRR Reference Rate to 5.5 Percent

Bank Indonesia (21-22/12) decided to increase the BI 7-Day Reverse Repo Rate (BI7DRR) again by 0.25 bps to 5.5 percent. This policy takes into account the depreciating rupiah exchange rate.

BI Governor Perry Warjiyo, in announcing the results of the December 2022 Monthly Board of Governors Meeting, Thursday (22/12), announced, “The Bank Indonesia Board of Governors Meeting (RDG) on 21 and 22 December 2022 decided to increase the BI 7-Day Reverse Repo Rate ( BI7DRR) by 25 bps to 5.50 percent, Deposit Facility interest rate by 25 bps to 4.75 percent, and Lending Facility interest rate by 25 bps to 6.25 percent,”

Perry said the decision to increase interest rates in a more measured manner was a follow-up step for a front-loaded, pre-emptive and forward-looking manner, ensuring that inflation and inflation expectations continued to decline so that core inflation was maintained within the 2-4 percent range.

BI also stated that this policy was considering the rupiah exchange rate had depreciated. However, this value is better than other countries such as China to India.

BI will control the rupiah to control inflation and stability. Therefore, it is believed that the Rupiah will strengthen towards its fundamentals next year.

Previously, BI assessed that the inflation rate would decline to around 3 percent at the end of 2023, as The Fed’s monetary policy tightening began to ease. BI also promised not to raise interest rates excessively.

On the other hand, loans extended by banks continued to grow positively in November 2022.

Based on an analysis of Bank Indonesia’s (BI) money supply, lending grew 10.8% year on year (YoY) to IDR 6,317.7 trillion in November 2022.

“The development of lending mainly occurred in the corporate debtor category, which rose 15.0% YoY to IDR 3,234.9 trillion. Meanwhile, credit to individuals rose 8.1% YoY,” quoted a BI report on Friday (23/12).

Based on the type of use, the development of credit distribution in November 2022 was mainly due to the development of productive credit, namely Working Capital Loans and Investment Loans.

Working Capital Loans (KMK) grew 11.6% YoY in November 2022. Sourced from the KMK Trade, Hotel, Restaurant (PHR) sector which grew by 8.1% YoY.

Especially in the sub-sector of Wholesale Trading of Gas, Liquid, and Solid Fuels, as well as Similar Products in DKI Jakarta. Meanwhile, working capital credit for the Manufacturing Industry sector grew 10.9% YoY in November 2022, especially in the Pharmaceutical and Herbal Industry sub-sector in West Java and Banten.