Bank of Indonesia Hints on Normalizing Policy After Rebounding Sharply from Recession

Central bank of Indonesia hinted on Thursday that it will begin normalizing policy soon even if benchmark interest rate is unchanged.

The central bank kept sever-day reverse repurchase rate record low at 3.5% at its first monetary policy meeting of 2022. Governer Perry Warjiyo in a briefing in Jarkarta told the central bank will start raising bank’s reserve requirement ratio with an increase of 5% in March.

Bank Indonesia kept the seven-day reverse repurchase rate at a record-low 3.5% at its first monetary policy meeting of 2022, as predicted by all 29 analysts in a Bloomberg survey. GIn a briefing in Jakarta, Gov. Perry Warjiyo said BI will start raising banks’ reserve requirement ratio, with an increase to 5% in March.

“BI is trying to have its cake and eat it too,” preparing to normalize policy while encouraging lending growth through macroprudential measures, said Wellian Wiranto, economist at Oversea-Chinese Banking Corp. in Singapore, as reported by Bloomberg. He added “to that end, a gradual tightening of RRR is in the pipeline too.”