Dion Bisara, Jakarta – Bank Indonesia, the country's central bank, decided on Thursday to keep its benchmark interest rate at 5 percent, ending a series of cuts in the past four months aimed at stimulating the economy.
Bank Indonesia this time opted to spare some room for further monetary easing in the future, having seen local lenders starting to respond to its loosening policy since July.
"Lending rates have started to come down, primarily due to investment loans and working capital loans, which were recorded at 10.04 percent and 10.26 percent respectively [in October]," the central bank said in a statement.
The spare room is critical for Bank Indonesia to provide support for the economy in the next few months amid continuing tension in the China-US trade relations and a global economic slowdown.
"The monetary policy remains accommodative and consistent with the estimated inflation rate to stay within the targeted range... and [to maintain] efforts to keep the economic growth momentum amid a global economic slowdown," Bank Indonesia's communication director Onny Widjanarko said in another statement.
In each of four consecutive months starting July, Bank Indonesia had cut the benchmark rate by 25 basis points with an aim to prop up growth. The Indonesian economy grew by 5.02 percent in the third quarter, having been in slowdown mode in the past four quarters.
Inflation in the country remains low, allowing the central bank to loosen its monetary policy. The inflation was at 3.13 percent in October 2019, down from 3.39 percent in September.
"We think the low inflation will persist, keeping the CPI [Consumer Price Index] inflation in 2019 at around 3.1 percent," Onny said.