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Bank Indonesia Expected to Hold Rates Steady

18 Jan 2017 5:16 am
By I Made Sentana 

JAKARTA, Indonesia--Bank Indonesia is likely to start 2017 with no major changes to its policy of prioritizing stability over economic growth, as it watches the incoming U.S. presidential administration.

Economists expect volatility in the financial markets around the globe before new U.S. policies emerge, making it risky for the Indonesian central bank to cut interest rates.

Bank Indonesia is estimated to have spent around $1 billion in November to defend the rupiah and the government's rupiah bond prices in reaction of Donald Trump's surprise election win.

All of the 13 regional economists polled by The Wall Street Journal are expecting Bank Indonesia to announce Thursday that it is keeping the benchmark seven-day reverse repo rate unchanged at 4.75%.

Bank Indonesia will be seen as maintaining the stability of the rupiah amid rising global risks, said Bank Permata economist Josua Pardede.

Bank Indonesia Deputy Gov. Perry Warjiyo hinted Friday that the government would seek other ways to help the economy grow this year.

In total, Bank Indonesia cut rates last year by 1.5 percentage points, with the last quarter-point cut in October, to help economic growth while inflation was within its target of 3%-5%.

Inflation ebbed to 3.02% last year from 3.35% in 2015. But price increases are expected to speed up this year on higher energy prices.

Write to I Made Sentana at i-made.sentana@wsj.com

(END) Dow Jones Newswires

January 18, 2017 00:16 ET (05:16 GMT)

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