Tempted When To Raise Interest Rates, Bi Governor: We Talk About Next Year, Patient Sitik Toh Yo!

Governor of Bank Indonesia (BI), Perry Warjiyo. (Photo: Bank Indonesia)

JAKARTA - Governor of Bank Indonesia (BI) Perry Warjiyo has signaled that he will maintain the trend of low interest rates throughout the year. This he conveyed when answering media crew questions about the potential of the central bank to drive interest rates to a higher level.

"We'll talk about next year, patience anyway!" he said in an online press conference on Tuesday, May 25 after holding a Board of Governors Meeting.

According to Perry, there is no urgency in reforming interest rate policy which is considered very strategic. Because, a number of economic indicators are considered not yet possible to return aggressive levels.

"This year inflation is still low, besides (low interest rates) are still needed to boost economic growth. We also see rupiah stability is maintained with the current rate set. The bottom line is that it will stay afloat until the signs of rising inflation," he said.

Based on data reported by BI, annually inflation remains low at 1.42 percent year-on-year (y-o-y), although it increased slightly compared to inflation in the previous month of 1.37 percent y-o-y.  Inflation is still far from the target range of 3 percent plus minus 1 percent by 2021.

Meanwhile, the rupiah exchange rate is controlled as shown by strengthening as of May 24, 2021 with 0.63 percent point-to-point and 1.42 percent on average compared to April 2021 levels.

"The strengthening of the exchange rate was driven by the inflow of foreign capital into the domestic financial market, although in recent developments there has been pressure due to fluctuations in US Treasury Bond (UST) yields," he said.

For information, BI decided to keep the benchmark interest rate at 3.50 percent in may 2021. VOI noted that the last interest rate update occurred in February 2021 when the central bank cut interest rates by 25 basis points (BPS) from 3.75 percent to 3.50 percent.