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Economy

Bank Indonesia holds interest rate steady amid Trump-related uncertainty

Indonesia's central bank has cut its policy rate six times since January to boost lending and drive the economy.

JAKARTA -- Bank Indonesia on Thursday put a stop to its policy rate cut streak, keeping its benchmark seven-day reverse repurchase rate at 4.75% on the back of global economic uncertainty arising from Donald Trump's election win in the U.S. presidential election.

"Indonesia has thus far been able to maintain its economic stability. We believe that the economy is in good condition with the stable currency and inflation rates. Current account deficit is good, trade balance is good," Bank Indonesia Gov. Agus Martowardojo told a press conference after a two-day meeting of the bank.

"Uncertainties, however, are increasing outside the country following the U.S. election. Therefore, BI has decided to hold our rate at 4.75%."

Before the monthly meeting on Thursday, Bank Indonesia had cut its policy rate six times by a total of 150 basis points since January to boost lending and drive the economy. The six rate cuts are a combination of two cuts of the seven-day reverse repo rate, a new policy rate introduced in August, and four cuts of the previous benchmark, the overnight reference rate.

The bank said the possibility of the U.S. Federal Reserve increasing its rate in December has increased -raising the possibility of a widening fiscal deficit in the U.S., given Trump's plans to cut corporate tax rates and expand spending.

Bank Indonesia Deputy Gov. Mirza Adityaswara said the "period of uncertainties" from the Trump effect is expected to last until January, and until then the bank will keep a close watch on Trump's statements -- especially regarding fiscal, economy and international trade.

"We are still waiting for the cabinet lineup, from which we can check schools of thoughts of policymakers in Trump's cabinet," Adityaswara said. "There will probably be statements around this in December."

Indonesia's stock market and currency, the rupiah, have suffered from falls following Trump's win.

The benchmark Jakarta Composite Index has lost 4% since Nov. 9, while the rupiah dropped 2.2% against the U.S. dollar between Nov. 8-16.

Bank Indonesia said the rupiah is more stable since its intervention in the currency market last week.

"With the stable and healthy domestic economic condition, even when there has been depreciation, it is due to sentiments and it will be temporary," Martowardojo said.

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