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Indonesia Central Bank Keeps Rates On Hold

Indonesia's central bank decided to leave its key interest rates unchanged to maintain the rupiah exchange rate stability amid the downbeat economic outlook.

The Board of Governors of Bank Indonesia decided to retain the BI 7-day reverse repo rate at 3.50 percent. The bank last reduced the rate by 25 basis points in February.

The deposit facility interest rate was kept at 2.75 percent, and the lending facility rate at 4.25 percent.

Although the bank assessed improvements in exports, fiscal spending and investment, the economic growth outlook was downgraded to 4.1-5.1 percent from 4.3-5.3 percent.

Inflation is forecast to remain under control within the 2-4 percent target range in line with weak demand and adequate supply.

Looking forward, the bank forecast the current account deficit to remain low at around 1.0 -2.0 percent of GDP in 2021.

The main concern for the central bank is the uncertain outlook for the rupiah, which the Bank keeps a close eye on due to the country's high level of foreign currency debt, Gareth Leather, an economist at Capital Economics, said.

Despite the downbeat outlook for the economy, there is little room for further rate cuts this year, the economist noted.

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