Bank Indonesia leaves key rate unchanged

Bloomberg

Indonesia’s central bank left its benchmark interest rate unchanged, dropping some of its more hawkish comments of the past as the Federal Reserve’s policy pause helped to ease pressure on emerging markets.
The seven-day reverse repurchase rate was left at 6 percent for a third month, as predicted by all 33 economists surveyed by Bloomberg. Bank Indonesia hiked six times last year by a total 175 basis points.
Governor Perry Warjiyo didn’t reiterate past comments to keep a “hawkish” stance and remain “pre-emptive” on policy, saying instead that interest rates are focused on maintaining “external stability.”
“This decision is consistent with efforts to strengthen external stability, especially to control the current-account deficit to be in a safe level and maintain the attractiveness of domestic financial assets,” Warjiyo said.
The central bank took an aggressive approach last year to the sell-off in the currency, tightening policy to stabilize the rupiah, despite a subdued inflation environment With the Fed taking a more “ patient” approach to future policy tightening, emerging markets, including Indonesia, are getting a breather.
Warjiyo pared back expectations for Fed rate hikes to one this year The rupiah has gained about 2 percent against the dollar so far this year, giving policy makers room to hold. Warjiyo said the currency remains undervalued and will probably strengthen further Inflation in Southeast Asia’s biggest economy remains benign at 2.8 percent, well within the central bank’s 2.5 percent to 4.5 percent target band.
The current account deficit is still a key problem and one of the reasons policy makers are remaining cautious. The central bank said it will coordinate its policies with the government to control the deficit at 2.5 percent of gross domestic product this year