Indonesia Leaves Rates Steady

The central bank of Indonesia left its benchmark repo rate unchanged at 4.25 percent on November 16th 2017, in line with market expectations. Policymakers said the current policy rate is adequate to control inflation, to maintain a healthy current account deficit and to build economic growth momentum. So far this year, the central bank already cut the borrowing cost twice by a total of 50bps in an attempt to boost the economy. The lending and the deposit facility rates were also left steady at 5 percent and 3.5 percent respectively.
Bank Indonesia | Joana Taborda | 11/16/2017 3:19:54 PM
Excerpts from the Bank Indonesia Press Release:

The decision was consistent with efforts to maintain macroeconomic and financial system stability as well as build economic recovery momentum, while paying due consideration to global and domestic economic dynamics. Bank Indonesia believes the current policy rate is adequate to control inflation within the target corridor and maintain a healthy current account deficit. Furthermore, the domestic economy has continued to grow, with a more equitable and balanced structure. Nonetheless, Bank Indonesia shall remain vigilant of the risks, including the global risks linked to the plans to tighten monetary policy in several advanced countries, as well as domestic risks, such as the limited growth in household consumption and banking intermediary. Bank Indonesia will continue to coordinate with the Government to reinforce the policy mix in order to maintain macroeconomic stability and financial system stability as well as to enhance structural reforms to strengthen fundamentals of Indonesia’s economy.

The global economy has continued to expand. The global economy is predicted to accelerate by 3.6% on 2017 and 2018 on the back of growth in China, Japan and Europe that has beaten previous expectations, coupled with solid economic gains in the United States. Strong exports and domestic demand are driving China’s economy and restoring consumer confidence. Furthermore, Japan’s economic outlook has been upgraded in line with the ongoing export recovery. In Europe, the economic growth projection has also been revised upwards on export performance, supported by improving world trade and domestic economic recovery. Meanwhile, tenacious consumption and increasing investment contributed to the US economic gains. Congruent with the improving world economic outlook, world trade volume (WTV) and international commodity prices are both expected to surpass the previous projections. Moving forward, Bank Indonesia shall continue to monitor the global risks, including potentially tighter monetary policy in advanced countries as well as geopolitical factors.

Bank Indonesia predicts national economic growth in 2017 at 5.1%, improving thereafter to 5.1%-5.5% in 2018.

Throughout 2017, the balance of payments is expected to remain positive on the back of capital and financial account surplus, with current account deficit maintained at below 2% of GDP.

Indonesia Leaves Rates Steady