Bank Indonesia holds rates, trims domestic growth forecast due to COVID

JAKARTA -- Bank Indonesia (BI) has kept its policy rate unchanged at 3.50% as widely expected as it strikes a balance between supporting growth and maintaining currency stability. Although the central bank downgraded its domestic growth forecast, it is more positive on global growth.

The domestic growth forecasts was lowered from 4.1-5.1% to 3.5-4.5% assuming that virus curbs on business would be in place for one month.

ANZ Bank in a research note said it believed BI would keep its policy rate at the current low level through 2021, and that the was more likely to be up than down.

BI Governor, Perry Warjiyo, noted that the stricter mobility curbs would hit household consumption hardest, and that he expects Q3 growth to be hit, before a rebound in Q4.

However, he also noted that growth may be stronger than the 3.9% midpoint if vaccination and government stimulus spending gained pace.

Meanwhile, BI has turned more positive on global growth, upgrading its 2021 forecast to 5.8% from 5.7%.

www.research@anz.com  (ATI).