(Bloomberg) — Indonesia’s central bank kept the benchmark interest rate steady, pausing an easing cycle and setting aside concerns about economic growth to preempt any currency weakness from US President Donald Trump’s tariff threats.
Most Read from Bloomberg
The rupiah pared losses after Bank Indonesia kept the BI-Rate at 5.75% on Wednesday as predicted by 21 of 35 economists in a Bloomberg News survey. The rest expected a quarter-point cut.
“Stability is the most important thing for our economy to continue growing,” Governor Perry Warjiyo said in his briefing in Jakarta. “That’s why we continue to be in the market and maintain the stability of the rupiah, especially when global turmoil is high.”
The governor said he sees room for further rate cuts but the timing would depend on the global situation. He said the central bank is intervening in the foreign currency market “almost every day.”
The hold follows a similar move by the Philippine central bank, which unexpectedly maintained its policy rate last week due to heightened global uncertainties. The pauses underline how central bankers across the world are having to juggle the need to protect their currencies from Trump’s trade policies while supporting economic growth and anchoring inflation at home.
For policymakers in Southeast Asia’s largest economy, the balancing act is complicated by domestic capacity showing signs of plateauing while the currency remains under pressure. In the past couple of meetings, Bank Indonesia has alternated between prioritizing economic growth and rupiah stability.
“After being seemingly comfortable enough with the rupiah to surprise markets with a rate cut in January, it is notable that BI is now emphasizing rupiah stability again in its decision to stay on hold today,” Barclays Plc economist Brian Tan said.
To soften the blow of elevated borrowing costs, Bank Indonesia ramped up incentives for banks to lend to priority sectors, including public housing. Lenders will be able to lower their reserve requirement ratios by as much as 500 basis points starting April 1, up from a maximum of 400 basis points. That would cut their RRR by more than half from the 9% for conventional lenders and 7.5% for Shariah-compliant banks.
The rate pause suggests that monetary authorities are still keeping one eye on currency stability, which is part of its mandate. It follows the government’s move to require many exporters to keep 100% of their overseas earnings onshore for 12 months to bolster foreign exchange reserves.
