Bank Indonesia Is Predicted To Maintain Reference Interest Rate At 4 Percent, This Is Why

Bank Indonesia Is Predicted to Maintain Reference Interest Rate at 4 Percent, This Is Why

Bank Indonesia logo or illustration. TEMPO / Imam Sukamto

Bank Indonesia logo or illustration. TEMPO / Imam Sukamto

, Jakarta - Some economists predict Bank Indonesia or BI will maintain the interest rate benchmark 7-day reverse repo rate at the level of 4 percent. The central bank was due to announce the results of the September governor's board meeting today, Thursday, September 17, 2020.

Senior Economist from PT Bank Rakyat Indonesia (Persero) Tbk. Anton Hendranata, for example, estimates that BI will still pay attention to the volatility of the rupiah and the pressure of foreign capital outflows before making a decision.

"Despite low inflation and economic growth leading to a recession in the third quarter of 2020, rupiah volatility and pressure from foreign capital outflows are expected to be considered by the central bank in its policy to determine interest rates," said Anton.

Bank Permata economist Josua Pardede has a similar message. He said there are three factors that are considered by the central bank in deciding the interest rate policy this time.  

First,   namely BI's consideration to keep the rupiah exchange rate stable. If observed in the short term, the volatility of the rupiah exchange rate increased on average in September 2020, as indicated by   one-month implied volatility   which increased to 11 percent, from August which was recorded at around 10.7 percent.

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