UPDATE 1-Indonesia’s keeps rates at record lows, trims 2021 GDP forecast | Reuters

Indonesia’s central bank kept its main policy rate at a record low on Tuesday and trimmed its 2021 growth forecast for Southeast Asia’s largest economy, while pledging to strengthen measures to keep the rupiah currency stable.

Bank Indonesia (BI) left the benchmark 7-day reverse repurchase rate at 3.50%, where it has been since February and as expected by all 27 analysts in a Reuters poll.

Governor Perry Warjiyo said a global economic recovery had been stronger than initially anticipated, underpinning demand for Indonesia’s exports, but warned that domestic consumption remained muted due to mobility restrictions to control the coronavirus outbreak.

BI’s forecast for economic growth this year was trimmed to 4.1%-5.1% from 4.3%-5.3% previously.

“Consumption is also improving according to various indicators ... but the level of improvement, based on the latest data, is lower than our earlier expectation,” Warjiyo told a streamed news conference.

BI would keep strengthening measures to keep the rupiah stable, he said, after the currency has been caught up in a broad sell-off in risk assets, driven by rising U.S. inflation expectations and Treasury yields.

The rupiah has firmed slightly in the past few days but remains one of the worst performing currencies in emerging Asia, with losses of 3.2% so far this year. The currency gained slightly after the policy announcement.

Warjiyo said he believed the rupiah would continue to strengthen on portfolio inflows.

After suffering its first full-year contraction in over two decades in 2020, the economy is expected to post its first positive growth in five quarters in April-June as mass vaccination is rolled out, the government has said.

BI has cut interest rates by a total of 150 basis points, pumped 798.85 trillion rupiah ($55.11 billion) liquidity into the financial system and relaxed lending rules since 2020 to help Indonesia weather the COVID-19 pandemic. ($1 = 14,495.0000 rupiah) (Reporting by Gayatri Suroyo and Fransiska Nangoy; Editing by Ana Nicolaci da Costa, Ed Davies)

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