Indonesia Keeps Monetary Policy Steady

The central bank of Indonesia left its benchmark repo rate unchanged at 4.25 percent for the fifth straight meeting on February 15th 2018, in line with market expectations. Policymakers said the current policy stance is sufficient to maintain macroeconomic and financial stability and support the domestic economic recovery. The lending and the deposit facility rates were also left steady at 5 percent and 3.5 percent respectively.
Bank Indonesia | Joana Taborda | 2/15/2018 12:56:30 PM
Excerpts from the Bank Indonesia Press Release:

The policy is consistent with efforts to maintain macroeconomic and financial system stability while supporting the domestic economic recovery. Bank Indonesia considers the previous steps taken to ease monetary policy adequate in terms of building domestic economic recovery momentum. Moving forward, Bank Indonesia believes that maintained economic stability will be the backbone of stronger and more sustainable economic growth. Furthermore, Bank Indonesia will continue to monitor the risks, including global risks such as growing uncertainty in the global financial markets owing to anticipation of a higher-than-expected FFR hike, coupled with the rising oil price, as well as the domestic risks linked to ongoing corporate consolidation, a sluggish bank intermediation function and inflation risk. To that end, Bank Indonesia will constantly optimise its mix of monetary, macroprudential and payment system policy to strike an optimal balance between macroeconomic and financial system stability and the current economic recovery. In addition, Bank Indonesia also strengthens policy coordination with the Government to maintain macroeconomic and financial system stability, while enhancing structural reforms.

In 2018, Bank Indonesia projects the domestic economy to expand in the 5.1-5.5% (yoy) range, buoyed by investment in ongoing infrastructure projects coupled with increasing non-building investment, including private investment, specifically machinery and equipment. In addition, solid export growth is expected to continue as the global economy continues to recover and international commodity prices remain high.

Bank Indonesia projects the current account deficit in 2018 to remain under control and within a safe threshold at 2.0-2.5% of GDP in line with domestic economic improvements.

Bank Indonesia projects inflation in 2018 within the target corridor, namely 3.5±1%

Indonesia Keeps Monetary Policy Steady