ANN/THE JAKARTA POST – The Bank of Indonesia (BI) maintained its benchmark interest rate at the same level for a seventh straight month at its monthly monetary meeting.
Following a meeting on Thursday, BI Governor Perry Warjiyo briefing the media said the benchmark seven-day reverse repo rate will remain unchanged.
“The decision to maintain the BI 7-Day Repo Rate (BI7DDR) at 5.75 per cent is consistent with the monetary policy to ensure that inflation falls into the target range,” said Perry.
The central bank’s consumer price index (CPI) target for this year is three plus/minus one per cent. For 2024, it is set to 1.5 to 3.5 per cent.
Statistics Indonesia (BPS) revealed earlier this month that annual growth of the CPI was 3.08 per cent in July, down from 3.52 per cent in June.
Following months of high price pressure, inflation in Indonesia has remained within the BI range since May, when the CPI grew at exactly four per cent.
The latest economic growth figures have also been solid as the country beat expectations with second-quarter gross domestic product growth of 5.17 per cent, as revealed by BPS on August 7.
Overall economic conditions are not without risks though, given the economic slowdown in China, Indonesia’s main trade partner.
However, Perry said the archipelago’s economy remained solid, driven by domestic spending, and that the central bank was not going to respond by cutting rates just yet.
BI is currently working off a baseline scenario of the United States Federal Reserve raising its federal funds rate by 25 basis points once more this year in September.
In the briefing, BI also noted that foreign exchange time deposits had begun to gain traction in response to new rules mandating that commodity firms keep their export receipts (DHE) within the country.
BI launched seven financial instruments for that purpose.
BI Deputy Governor Aida Budiman said at the same briefing that DHE time deposits had started to show “signs of upswing”.
As an incentive, the central bank offered competitive rates for exporters’ deposits, designed to be higher than those offered by foreign banks. The government also offers much lower tax rates on export receipts held in the country than typical time deposits, which were taxed at around 20 per cent.
Month-long foreign earnings time deposits are taxed at 10 per cent, but the rate drops to 2.5 per cent for tenors of six months and to zero for tenors longer than six months.
The Finance Ministry offers even lower tax rates if exporters convert their earnings to rupiah, she said.
