Bank Indonesia Holds Rates Amid Stock Market Slump

Bank Indonesia maintained its benchmark interest rate at 5.75 per cent on October 21, marking the fourth consecutive policy review without a change. The central bank aims to support economic growth and keep inflation within a target range of 1.5 to 3.5 per cent.

To encourage lending and provide liquidity, Governor Destry Damayanti announced that the reserve requirement ratio for banks will be reduced by one percentage point in November and another percentage point in December. Simultaneously, the central bank increased the overnight deposit facility rate by 25 basis points to 5.00 per cent.

These measures follow a record-breaking stock market slump and significant volatility triggered by a warning from MSCI that Indonesia could be demoted from emerging market to stand-alone status. The rupiah has remained under pressure, hovering near 18,000 per US dollar due to high oil prices, a strong US dollar, and shifting foreign investor sentiment.