Indonesia's Central Bank Keeps Interest Rates Unchanged, Middle East Conflict Escalates Economic Risks

Investing.com - Indonesia’s central bank kept interest rates unchanged on Tuesday, a decision in line with market expectations, as the Middle East conflict has increased risks to the country’s economy.

The Bank of Indonesia maintained its benchmark seven-day reverse repurchase rate at 4.75%, continuing a pause since the last rate cut in September of last year.

All seven economists surveyed by The Wall Street Journal expected this decision. The central bank also kept the overnight deposit facility rate at 3.75% and the lending facility rate at 5.50%.

Bank Indonesia Governor Perry Warjiyo said at a Tuesday press conference that the decision to hold rates steady reflects efforts to stabilize the rupiah amid the Iran conflict and keep inflation within the 1.5%-3.5% target range.

The central bank stated it will continue to strengthen policies to protect the currency and respond to worsening global market conditions caused by the Middle East conflict. These measures include foreign exchange interventions, attracting capital inflows, and ensuring liquidity.

Bank Indonesia said it will optimize monetary tools to enhance resilience and is prepared to adjust policies as needed.

Despite ongoing Middle East tensions, the central bank emphasized the need to maintain economic growth, with first-quarter expansion supported by domestic demand and investment. It will strengthen policies to keep growth within the 4.9%-5.7% target range.

The Bank of Indonesia expects inflation to remain within the 1.5%-3.5% target range in 2026-2027 and will enhance its proactive monetary policy measures while coordinating with the government to control prices.

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