Bank Indonesia, the central bank of Southeast Asia's largest economy, kept its key interest rate (BI rate) at 7.50 percent at the December policy meeting on Thursday (17/12). Meanwhile, the overnight deposit rate facility (Fasbi) was left unchanged at 5.50 percent and the lending facility at 8.00 percent. It was the tenth consecutive month without changing the country's interest rate environment (in February 2015 the central bank cut the BI rate by 0.25 percent).
Despite pressures from the political arena and the business community, controlled inflation, as well as the positive reaction of Indonesian assets to the Federal Reserve's 0.25 percentage point interest rate hike yesterday (16/12), Bank Indonesia decided to remain committed to its relatively tight monetary stance as there could still emerge pressures on the Indonesian rupiah in the period ahead as a consequence of higher US interest rates. So far this year the rupiah has depreciated nearly 13 percent against the US dollar so far this year.
Bank Indonesia will monitor external risks stemming from the Fed Fund Rate hike and the economic slowdown in China before deciding to change its interest rate environment.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.16 percent to IDR 14,028 per US dollar on Thursday (17/12).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia