By Shaloo Shrivastava

BENGALURU, (Reuters) – Indonesia’s central banks will keep interest rates stable next week in an effort to boost the economy. This is according to a Reuters survey of economists.

Bank Indonesia (BI), which was slashed by 150 basis points its benchmark 7-day reverse repurchase interest rate to a record low 3.50%, has injected liquidity in excess of $57 billion since the onset and continuing the pandemic.

According to all economists, the rate of change was expected to stay the same at the conclusion BI’s October 18-19 policy meeting.

Based on the results of the poll conducted last week, median predictions showed interest rates expected to remain at the current rate of 3.50% for the third quarter. However, they will rise 50 basis points by the end of the year.

Capital Economics senior Asia economist Gareth Leather stated that as long as the inflation stays low and the currency is stable they will continue to support monetary policy to boost recovery.

Since mid-2020, inflation has remained below the target range of 2 to 4 percent. It was forecast to stay subdued in 2019. It is expected to rise next year to 2.9% and 3.0% by 2023.

While the Indonesian rupee has declined by around 1% this year against a rising dollar, it’s remained relatively steady. Support has been provided by the recent rise in energy costs, as Indonesia is an important commodity exporter.

While the central bank is cautious and trying to prevent any backdrafts from U.S. Federal Reserve plans to reduce its bond buying program (which will likely start next month), the central bank remains concerned. Since 2013, when the Fed stopped tapering, the rupee has fallen more than 20%.

Leather stated that in 2013, the currency was among five fragile currencies that were caught up during a large sell-off.

“There are a lot of different things (now), all suggesting that Indonesia will not get as caught up in the mess it was back then.”

Analysts say that Indonesia’s economic situation is more stable. The current account deficit for Indonesia is small. BI estimates it at between 0.6% and 1.4% GDP.

In August, the trade surplus reached an all-time peak of $4.7 billion. However, it was forecast to fall to $3.8 billion by September.

The second quarter of this year saw Indonesia’s economy expand at its fastest rate in 17 years, ending a streak of four consecutive quarters of contraction due to the pandemic.

The outbreak of COVID-19-related illnesses in Asia in July, however, slowed the optimism and forced authorities to reinstate restrictions.

According to the most recent Reuters poll, Southeast Asia’s biggest economy is expected to expand 3.2% and 4.6% respectively in the just concluded quarter.

It is lower than the expected 4.7% to 4.8% in the Reuters last July economic outlook poll. This was at the time that the epidemic broke out.

It was predicted that the economy would grow by 3.4% in 2018 and increase to 5.1% in 2022. The forecasts for 2022 were lower than earlier estimates of 5.2% and 4.3%, respectively. According to the poll, growth will remain stable at 5.1% through 2023.

The economists at United Overseas Bank (OTC) noted that “Consumption should recover slowly, as restrictions are being eased,” “Further, investment should also recover faster, thanks to rising FDI, and recent government attempts to simplify business licensing.”

(For more stories, see the Reuters economic poll).