Bank Indonesia (BI) left its benchmark rate unchanged at 3.50% at its May 2021 monetary policy meeting (MPC).
Consequently, Bank Indonesia maintained the Deposit Facility rate at 2.75%, as well as the Lending Facility rate at 4.25%. The bank stated that the decision is consistent with the forecast for inflation to remain low as well as efforts to maintain rupiah exchange rate stability and accelerate economic recovery.
The bank will also continue to optimize the accommodative monetary and macroprudential policy through various policy measures.
Bank Indonesia noted that the credit growth remained sluggish due to persistent weak demand from the real sector and relatively high level of credit risk perception from banks. It expects that loan credit will start to pick up in 2nd Quarter,2021, in line with rising economic growth, improving corporate performance, and further loosening of bank’s standard lending index. In 2021, credit is expected to grow by 5-7%.
Going forward, economists from UOB Group are in the view that Bank Indonesia will keep its accommodative monetary policy via other macroprudential, and liquidity-supporting measures to effectively transmit the lowering of the benchmark interest rate so far into the economy. They are keeping their Bank Indonesia rate forecast steady at 3.50% for the rest of the year.