ank Indonesia (BI) has kept its benchmark interest rate unchanged for a second month and has revised up its gross domestic product projection for this year.
Following the central bank’s two-day monthly policy meeting, BI Governor Perry Warjiyo announced in a press conference on Wednesday that the key interest rate, the BI Rate, remained at 4.75 percent.
“From the financial market [side], uncertainty has increased again, as the market assessment regarding the United States’ policy rate reduction is less dovish,” Perry said.
In the past few months, most market actors had expected the United States Federal Reserve (Fed) to cut its federal funds rate (FFR) by 25 basis points (bps) in December, but CME Group’s FedWatch Tool shows that more than half of interest rate traders now believe the US central bank will instead hold the benchmark rate.
Perry mentioned several reasons for the changed assessment, namely the tariff policy which hindered inflation from declining as well as the US job market that remains sluggish because of “immigration policy and government shutdown”.
Fed monetary policy decisions are watched closely by other central banks around the world. The general expectation is for US interest rates to come down further, but assessments vary as to how fast this may happen.
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BI has not changed its own key rate since making cuts of 25 bps in each of the three monthly meetings from July through September.