JAKARTA • Indonesia’s central bank governor Perry Warjiyo (picture) said the benchmark interest rate is near its peak, but he doesn’t see room yet to ease policy.
Bank Indonesia (BI) will continue to maintain “sound, consistent and transparent” policy and provide guidance to financial market participants as global and domestic markets evolve, he said in an interview yesterday with Bloomberg Television in Yogyakarta, Indonesia. He added it was “difficult to say” whether a rate cut is on the cards.
After hiking rates six times last year, policymakers in South-East Asia’s biggest economy are getting a breather from a more cautious US Federal Reserve (Fed). With investors scaling back bets on US rate increases this year, foreign inflows have returned to Indonesia and the currency has rebounded.
Warjiyo said the BI’s November rate hike was “pre-emptive” and “took into account the possibility of Fed fund rate hikes in December and March”. He sees two rate hikes from the Fed this year.
The central bank is maintaining a hawkish stance, with a focus on stability, while supporting economic growth through macro-prudential measures, Warjiyo said.
“So, even though our rate is 6%, we will ensure there is ample liquidity for banks to continue lending to support growth,” he said.
The rupiah has gained 7.4% against the dollar in the past three months, the most among Asian peers, and was up 0.3% to 14,150 as of 9:15am in Jakarta yesterday.
Warjiyo said the currency is still “undervalued” based on the central bank’s valuation of the exchange rate.
Separately, Indonesia’s resort island of Bali is set to impose a US$10 (RM41.40) levy on foreign tourists to preserve its environment and culture, The Jakarta Post reported, citing governor Wayan Koster. — Bloomberg