Indonesia Keeps Monetary Policy Unchanged


Bank Indonesia left its benchmark interest rate on hold at 7.75 percent during the meeting held on January 15th, as policymakers are confident that inflation will remain under control between 3 to 5 percent in 2015.

The lending facility and the deposit facility rate also stay unchanged at 8.0 percent and 5.75 percent respectively.

Excerpt from the statement by Bank Indonesia:

An overall assessment of domestic economic performance in 2014 along with the outlook for 2015 and 2016 indicate that the interest rate policy is consistent with efforts to control inflation towards its target corridor of 4±1 percent  in 2015 and 2016, as well as manage the current account deficit to a more sustainable level. Moving forward, the economy is expected to improve further with robust domestic growth and maintained stability, supported by global recovery momentum.

The economy achieved 5.1 percent growth in 2014, decelerating from 5.8 percent  in 2013. Domestic moderation was the result of declining exports due to weaker demand and low commodity prices as well as policy to restrict exports of unrefined minerals. Despite the decline of exports, manufacturing exports surged in line with the US recovery. On domestic demand side, however, the slowdown was attributed to limited government consumption as budget cuts took effect. Meanwhile, investment activity also experienced limited growth. Persistently robust economic growth was maintained by solid household consumption. In 2015, stronger economic growth is forecasted, namely in the 5.4-5.8 percent range.
 
Moving ahead, current account deficit is expected to improve. The decreasing international oil price and government subsidy reforms will improve the oil and gas account. In contrast, expanding non-oil/gas imports, as the government ramps up infrastructure projects, could potentially stifle improvements in the current account deficit. In terms of the capital and financial account, solid economic fundamentals due to ongoing structural reforms will attract capital inflows.

Indonesia Keeps Monetary Policy Unchanged


Bank Indonesia l Rida Husna l rida@tradingeconomics.com
1/15/2015 2:16:21 PM