- Bank Indonesia maintained its 7-Day Reverse Repo rate at 3.50%.
- Despite the recent calm in treasury markets, as well as its own downgrading of Indonesia’s growth forecast, BI moved to hold rates steady as the increasing divergence in economic recovery between the US and emerging markets heightens capital outflow risks from risky assets.
- With rate policy relatively constrained, BI is likely to focus on maintaining ample liquidity support for the government’s fiscal measures. It should also be noted that declining foreign ownership of government bonds since the pandemic began should weaken the vicious link between domestic bond yields and the exchange rate despite remaining uncertainties regarding bond yields and demand.
