Bank Indonesia holds rates steady, focus remains on ’undervalued’ rupiah

Bank Indonesia maintained its benchmark interest rate at 5.75% in Jakarta on July 11, 2023, prioritizing currency stability amid concerns about the undervalued rupiah. The central bank's decision comes as Indonesia faces persistent inflationary pressures while attempting to support economic recovery following the global economic downturn. Governor Perry Warjiyo emphasized that the stability of the rupiah remains a key focus for the monetary authority, which has been intervening in foreign exchange markets to prevent excessive volatility. The bank's statement highlighted that while inflation remains within target, external factors including global commodity prices and monetary policy tightening in major economies continue to pose risks to the Indonesian economy. Financial markets largely anticipated the rate hold, with analysts suggesting that Bank Indonesia is likely to maintain its accommodative stance until there are clearer signs of sustained economic recovery and inflation control.