Indonesia keeps key interest rate unchanged as global risks mount

Bloomberg

Indonesia’s central bank left its benchmark interest rate unchanged as the currency comes under renewed pressure from an escalation in trade tensions between the US and China.
The seven-day reverse repurchase rate was left at 6%, as predicted by all but one of 30 economists surveyed by Bloomberg. Governor Perry Warjiyo and his board raised the rate by a total of 175 basis points last year, and have resisted following central banks in the Philippines, Malaysia, India and New Zealand in easing policy this year given the market uncertainty.
Warjiyo said policy makers will monitor global risks and the stability of the economy “in considering the room for an accommodative monetary policy in line with low inflation and the need to push domestic economic growth.”
Indonesia officials are worried about potential spillovers from the US-China trade war. The rupiah has already taken a knock from the worsening global outlook, with the currency down more than 2.6% against the dollar in the past month. Weaker global demand and an escalation in trade tensions are key challenges for the economy, which the central bank expects will grow at below the midpoint of its 5% to 5.4% forecast range for this year.
“This is a credible response by BI, signaling it maintains top priority for its stability objective amid negative surprises on the trade deficit and importantly, the return of external risk from rising trade tensions,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “They should be cautious on the risk of cutting the policy rate too early given external risks.”
The rupiah closed stronger at 14,452 against the dollar after earlier falling to its lowest level since the beginning of January.