Indonesia rate on hold


JAKARTA • Bank Indonesia (BI) is keeping interest rates unchanged for the moment, given global uncertainties, and will turn to macroprudential policies to support economic growth, governor Perry Warjiyo (picture) said.

“Our monetary policy is always forward- looking and ahead of the curve,” Warjiyo said in an interview with Bloomberg Television’s Haslinda Amin in Chiang Rai in Thailand. “For the time being, we need to look at the external stability and that’s why were still holding up our interest rate.”

BI has kept its key rate unchanged following 175 basis points of hikes between May and November last year to counter an emerging-market sell-off.

The nation’s currency and bonds have rallied since then, and with the US Federal Reserve (Fed) putting rate hikes on hold, economists from Goldman Sachs Group Inc, Morgan Stanley and others predict Indonesia will cut rates in coming months.

Warjiyo said while global growth risks are rising, US developments remain the main factor driving sentiment in emerging markets. He said external conditions are improving, and is “positive and quite pleased” with the steps BI took last year to stabilise the currency. That allows the central bank to shift its focus to supporting economic growth.

It eased macroprudential norms last month to allow banks to boost lending to businesses to ease liquidity constraints ahead of April’s presidential and parliamentary elections.

The governor said economic growth will probably pick up this year, and authorities need to work harder to boost exports. The relaxation in macroprudential norms will support growth and lead to a loan growth of 12% this year, Warjiyo said. — Bloomberg