BI Mantains The BI 7-day Reverse Repo Rate at 5.25% But Cut Lending Facility Rate to 6.00%

Economic Research	22 August 2016
Indonesia
Economic Highlights
BI Mantains The BI 7-day Reverse Repo Rate at 5.25% But Cut Lending Facility Rate to 6.00% Bank Indonesia (BI) board of governors’ meeting decided to maintain the BI 7-day Reverse Repo (RR) rate, the benchmark policy, at 5.25% on 19th August 2016. Similarly, deposit facility rate was also maintained at 4.50% but the lending rate was cut by 100 bps to 6.0%. As mentioned in April 2016, a change in the benchmark rate from the BI rate to 7-day RR rate is aimed at improving monetary transmission’s effectiveness. In addition, the BI will also keep a more symmetrical and narrow interest rate corridor, the lower (Deposit Facility) and upper ceiling (Lending Facility), at 75 bps each below and above the BI 7-Day RR rate. The decision was made given that inflation remains low, the current account deficit is still manageable and the currency is relatively stable. Furthermore, BI believes that by maintaining the country’s macroeconomic stability, rooms for monetary easing remains open. Economist:  Rizki Fajar| +6221 2970 7065
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