Indonesia’s central bank left its policy rate unchanged on Wednesday, extending its cautious pause for a third straight meeting to sustain support for the rupiah.

Bank Indonesia (BI) kept the BI-rate at 6.25%, a decision expected by all 35 economists surveyed by Bloomberg News. The rate is at its highest level since the benchmark was introduced in 2016.

The decision affirms governor Perry Warjiyo’s stance earlier this month that the central bank will look to keep the policy rate steady until the currency finds firmer footing. A rate cut would only be considered in the fourth quarter, he had said.

The central bank, which kept its outlook on global growth at 3.2% this year, expects Indonesia’s economic performance to remain strong in the second half and on course with a previous 2024 gross domestic product forecast for a 4.7-5.5% expansion, Warjiyo said at the briefing.

The monetary authority is getting a breather, as clearer signs of a looming US rate cut helps temper dollar strength. The rupiah has gained about 1.5% against the greenback so far this month as foreign funds return to Indonesia’s stocks and bonds.

The local currency, which has gained in line with central bank’s measures, is seen to strengthen further, Warjiyo said.

While inflation is seen to stay within the 1.5-3.5% target for this year and next, widening fiscal and current account shortfalls remain a risk for the rupiah going forward.

Investors also continue to scrutinise the country’s leadership transition, wary of higher debt and budget deficit levels under the incoming administration.

Bank Indonesia may need to stay on guard and keep its market tools ready to counter any renewed volatility. That includes intervening in the spot, domestic NDF and bond markets, and issuing its high-yielding rupiah securities, or SRBI, to lure more inflows.

  - Bloomberg