Indonesia Leaves Rates on Hold

The Bank Indonesia left its benchmark interest rate steady at 7.5 percent as expected, following last month’s cut, saying current policy stance is consistent with bringing inflation to target and controlling current account gap.
Bank Indonesia | Joana Taborda | 3/17/2015 11:25:30 AM
The lending facility and the deposit facility rate also stay unchanged at 8.0 percent and 5.5 percent respectively.

Excerpts from the statement by the Bank Indonesia:

This decision is in line with the ongoing efforts to keep inflation within the target of 4±1% for 2015 and 2016, and to control current account deficit towards a healthier level at 2.5-3% of GDP in the medium term. As consequence, Bank Indonesia also strengthens measures to keep the rupiah stable. Bank Indonesia's policy mix will be focused on efforts to maintain macroeconomic stability, amidst rising uncertainty in the global financial markets. In this context, Bank Indonesia remains strongly committed to strengthening its monetary and macroprudential policy mix, as well as stepping-up coordination with the government to curb inflation and current account deficit, while encouraging speedy structural reforms. With this regard, Bank Indonesia supports the government's continued measures in carrying out structural reforms that would in turn serve to strengthen the balance of payment.

Economic growth in the First Quarter 2015 is projected to be higher than that of the previous period, mainly driven by rising private consumption, as inflation is kept in check. Government consumption has also picked-up, reflecting an increase in government spending. Meanwhile, exports may continue to decline, despite some signs of pick-ups, on the back of declining commodity prices and lingering weak global demand. On the other front, investment may still grow slightly in the first quarter 2015, and will continue to pick up in the following quarters as government spending rises. Looking ahead, the full-year 2015 economic growth should be between 5.4-5.8%, mainly driven by higher investment as a result of the realized infrastructure projects and improved investment climate, in addition to the continued strong consumption and the gradually improving exports.

Going forward, Bank Indonesia will continue to consistently keep the stability of the rupiah at the exchange rate that is in line with its fundamental.

Going forward, Bank Indonesia will continue to monitor various risk factors that affect inflation, among others are the global oil prices and the possibility of future adjustments in other administered prices.

Going forward, along with the improving economic growth, bank loan and third-party fund is expected to grow, respectively by 15-17% and 14-16% in 2015.

Indonesia Leaves Rates on Hold