​The BI Board of Governors Meeting agreed on 20th -21st th December 2023 to hold the BI-Rate at 6.00%, while also maintaining the Deposit Facility (DF) rate and Lending Facility (LF) rate at 5.25% and 6.75% respectively. From 21st December 2023, Bank Indonesia will change the name of its policy rate to the BI-Rate, replacing the BI 7-Day Reverse Repo Rate (BI7DRR), to strengthen monetary policy communication.  The new name does not change the meaning or objectives of the BI-Rate as the monetary policy stance of Bank Indonesia, with operationalisation still referring to Bank Indonesia reverse repo transactions with a tenor of seven days.   

The decision to hold the BI Rate at 6,00% remains consistent with the pro-stability focus of monetary policy, namely to strengthen rupiah stabilisation policy, and as a pre-emptive and forward-looking measure to maintain inflation within the 2.5%±1% target corridor in 2024.  Meanwhile, Bank Indonesia will maintain pro-growth macroprudential and payment system policies to foster sustainable economic growth. Bank Indonesia will also hold an accommodative macroprudential policy stance to revive bank lending/financing to businesses and households.  Payment system digitalisation will be accelerated to increase transaction volume and expand digital economic and financial inclusion, which includes the electronification of (central and regional) government transactions. Bank Indonesia has, therefore, strengthened its mix of monetary, macroprudential and payment system policies to maintain stability and nurture sustainable economic growth through the following measures:

1. Rupiah stabilisation through foreign exchange market intervention with a focus on spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as government securities (SBN) in the secondary market.
2. Strengthening the pro-market monetary operations (MO) strategy for effective monetary policy, which includes optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Forex Securities (SVBI) and Bank Indonesia Forex Sukuk (SUVBI).
3. Deepening prime lending rate (PLR) transparency policy with a focus on interest rates by economic sector (Appendix).
4. Accelerating payment system digitalisation towards greater transaction efficiency and expanding the digital economy and finance (EKD) ecosystem as follows: (a) Expanding QRIS implementation by: (i) setting a target of 55 million QRIS users in 2024, (ii) setting a target of 2.5 billion QRIS transactions in 2024, and (iii) strengthening the cross-border QRIS implementation strategy to accelerate uptake, (b) Strengthening Indonesia Credit Card (KKI) implementation for the government segment by developing online payment features, while expanding more intensive socialisation, coordination and monitoring activities.
5. Expanding international cooperation with other central banks and authorities in partner countries, particularly through cross-border QRIS linkages and local currency transactions (LCT), as well as facilitating investment, trade and tourism promotion in priority sectors in conjunction with relevant institutions. 

Policy coordination between Bank Indonesia and the Government is also constantly improved to maintain macroeconomic stability and bolster economic growth.  Bank Indonesia strengthens policy coordination with the (central and regional) Government and strategic partners, including the National Movement for Food Inflation Control (GNPIP) in various regions within the Central and Regional Inflation Control Teams (TPIP and TPID), as well as P2DD Teams to Accelerate and Expand the Electronification of Central and Regional Government Transactions.  Furthermore, policy synergy between Bank Indonesia and the Financial System Stability Committee (KSSK) is also strengthened to maintain financial system stability and revive lending/financing to businesses, particularly those in priority sectors.

Global economic moderation is accompanied by early signs that financial market uncertainty is easing.  Bank Indonesia projects global economic growth in 2023 at 3.0% before moderating to 2.8% in 2024.  Economic growth in the United States (US) and India in 2023 is stronger than initially projected, supported by household consumption and fiscal expansion.  On the other hand, China's economy is slowing in line with subdued household consumption and investment.  Inflation in advanced economies, including the United States, is falling yet remains above target.  Policy rates, including the Federal Funds Rate (FFR), are thought to have peaked yet will remain high for longer.  Similarly, government bond yields in advanced economies, including US Treasury bonds, are expected to track downward trends yet remain high in line with the long-term risk premia (term-premia) linked to the strong need for fiscal financing and servicing government debt.  The clearer direction of monetary policy pursued in advanced economies has eased global financial market uncertainty.  Consequently, capital inflows are returning to emerging market economies (EMEs), including Indonesia, accompanied by milder currency pressures.  Moving forward, several risks could reignite global economic uncertainty, however, including unresolved geopolitical tensions, economic moderation in several countries (including China), as well as persistently high policy rates and bond yields in advanced economies.

At home, economic growth in Indonesia remains solid, supported by domestic demand.  Household consumption and investment continue growing in line with consumer confidence and the ongoing completion of national strategic projects (PSN). This was confirmed by several main indicators in December 2023, such as consumer confidence, retail sales and the Manufacturing Purchasing Managers Index (PMI). Meanwhile, export performance is improving on the back of growing demand in several major trading partners, including the US and India.  By sector, the main drivers of economic growth are wholesale and retail trade, the manufacturing industry as well as construction.  Bank Indonesia projects economic growth in 2023 in the 4.5-5.3% range.  In 2024, private and government consumption and investment are expected to continue tracking upward trends in line with robust consumer confidence, the positive impact of the upcoming general election as well as the ongoing development of several national strategic projects (PSN).  Consequently, economic growth in 2024 is projected to accelerate in the 4.7-5.5% range.  Bank Indonesia will continue strengthening fiscal-monetary stimulus synergy with macroprudential stimuli to drive economic growth, particularly from the demand side. 

Indonesia's Balance of Payments (BOP) continues to bolster external stability.  A positive trade balance persisted in November 2023, amassing a USD2.4 billion trade surplus, supported by Indonesia's main export commodities, namely coal, iron and steel as well as fixed vegetable oils and fats.  Foreign capital inflows were maintained in the form of portfolio investment to the domestic financial markets, with a net inflow totalling USD5.1 billion recorded in the fourth quarter of 2023 (as of 19th December 2023). The position of reserve assets at the end of November 2023 increased to USD138.1 billion, equivalent to 6.3 months of imports or 6.1 months of imports and servicing government external debt, which is well above the international adequacy standard of around 3 months of imports. Overall, BOP performance in 2023 is expected to remain sound, supported by a manageable current account maintained in the range of a 0.4% surplus to a 0.4% deficit of GDP.  Solid BOP performance is anticipated to persist in 2024, underpinned by maintained foreign capital inflows in line with the promising domestic economic outlook, coupled with a narrow current account deficit predicted in the 0.1-0.9% of GDP range. 

Rupiah exchange rates continue appreciating in line with monetary policy consistency by Bank Indonesia and early signs of easing global financial market uncertainty. As of 20th December 2023, the rupiah gained 0.44% in value against the level recorded at the end of November 2023.  Consequently, the rupiah has appreciated 0.37% on the level recorded at the end of December 2022, thereby outperforming the Philippine peso, Indian rupee and Thai baht, which depreciated 0.05%, 0.53% and 0.85% respectively.  In addition to BI stabilisation policy, rupiah appreciation continues as a corollary of foreign capital inflows, attractive yields on domestic financial assets for investment as well as the positive economic outlook.  Moving forward, Bank Indonesia will remain vigilant of several emerging risks and strive to maintain rupiah stability. In addition, Bank Indonesia will optimise the pro-market MO strategy through the SRBI, SVBI and SUVBI instruments to enhance liquidity management at domestic financial institutions and attract portfolio inflows from abroad. Meanwhile, Bank Indonesia continues strengthening coordination with the Government, banking industry and business community to support the effective implementation of instruments that retain the proceeds of natural resources exports in accordance with Government Regulation Number 36 of 2023 (PP DHE SDA) concerning the Foreign Exchange Proceeds of Exports and the Exploitation, Management and/or Processing of Natural Resources.  

Inflation remains under control within the target corridor. Consumer Price Index (CPI) inflation was manageable in November 2023 at 2.86% (yoy), with CPI inflation in 2023 projected within the 3.0%±1% target range.  Headline inflation was affected by low core inflation at 1.87% (yoy) in line with interest rate policy consistency and the rupiah stabilisation measures instituted by Bank Indonesia.  Administered prices (AP) inflation was also low at 2.07% (yoy). Meanwhile, volatile food (VF) inflation increased to 7.59% (yoy), edged upwards by seasonal factors impacting the production of several horticultural commodities.  Bank Indonesia will continue monitoring several risks that could undermine inflation control, particularly stemming from food prices.  To that end, Bank Indonesia continues strengthening its monetary policy mix and synergy with the (central and regional) Government under the auspices of the TPIP and TPID teams through the National Movement for Food Inflation Control (GNPIP) in various regions to ensure inflation remains under control within the 2.5%±1% target range in 2024. 

Bank Indonesia continues strengthening innovation to increase monetary policy effectiveness, which includes safeguarding manageable inflation and rupiah stability. To that end, Bank Indonesia is optimising the SRBI, SVBI and SUVBI pro-market monetary instruments to strengthen money market deepening policy and support efforts to attract portfolio inflows, while simultaneously optimising the SBN and forex securities held by Bank Indonesia as underlying assets. As of 19th December 2023, SRBI and SVBI auctions recorded Rp229.95 trillion and USD421.50 million in outstanding bids. The SRBI vehicle is traded actively in the secondary market, as reflected by non-resident holdings totalling Rp52.87 trillion.  Meanwhile, the SVBI position of non-residents was recorded at USD6 million. In addition, Bank Indonesia also issued SUVBI as a forex monetary instrument, with outstanding bids reaching USD129 million as of 19th December 2023.  Such innovative instruments are expected to support the pro-market monetary operation strategy of Bank Indonesia and attract foreign capital inflows to strengthen the external resilience of Indonesia's economy from the impact of global spillovers.  

Liquidity in the banking system remains adequate, thus strengthening bank lending capacity. In November 2023, the ratio of liquid assets to third-party funds (LA/TPF) remained high at 26.04%.  Adequate bank liquidity is supported by accommodative macroprudential policy, including implementation of the Macroprudential Liquidity Policy Incentives (KLM). In total, the additional liquidity generated by KLM incentives reached Rp163.3 trillion in December 2023, increasing Rp55 trillion since the policy incentives were introduced on 1st October 2023. The latest liquidity developments have impacted interest rates positively in the banking industry, with the 1-month term deposit rate and lending rate averaging 4.46% and 9.29% respectively in November 2023. Adequate bank liquidity is also supported by the availability of SRBI for trading in the secondary market, thus increasing bank flexibility in terms of liquidity management, while maintaining bank lending capacity.  Bank Indonesia will continue improving the effective implementation of Macroprudential Liquidity Policy Incentives (KLM) to revive bank lending/financing to sectors with strong economic leverage, thereby strengthening sustainable economic growth.

The bank intermediation function continued tracking an upward trend. Growth of third-party funds (TPF) was recorded at 3.04% (yoy) in November 2023, while loans disbursed by the banking industry accelerated to 9.74% (yoy) from 8.99% (yoy) the month earlier.  Such developments were supported by higher demand for financing in line with maintained corporate performance and household consumption. By sector, loan growth is primarily supported by the trade sector, manufacturing industry and corporate services. Furthermore, sharia finance increased 14.12% (yoy) in November 2023, while MSME loan growth reached 8.46% (yoy), primarily driven by trade, agriculture and social services.  Moving forward, Bank Indonesia will continue reviving bank lending/financing and strengthening synergy with the Government, financial authorities, government ministries/agencies, the banking industry and businesses.

Banking industry resilience remains solid, supported by a strong capital base and low credit risk.  The Capital Adequacy Ratio (CAR) in the banking industry is still high at 27.44% recorded in October 2023, with credit risk mitigated effectively, as reflected by low NPL ratios of 2.42% (gross) and 0.77% (nett).  The results of BI stress tests further confirmed solid banking industry resilience in the face of global pressures.  Bank Indonesia will continue strengthening synergy with the Financial System Stability Committee (KSSK) to mitigate various domestic and global economic risks that could potentially disrupt financial system stability. ​ 

Digital economic and financial transactions continue to perform solidly, supported by a secure, uninterrupted and reliable payment system.  The value of digital banking transactions in November 2023 increased 13.21% (yoy) to reach Rp5,163.76 trillion, while the value of electronic money transactions grew 16.95% (yoy) to Rp41.30 trillion.  The value of QRIS transactions continues enjoying impressive 157.43% (yoy) growth, amounting to Rp24.90 trillion, with QRIS users and merchants totalling 45.03 million and 30.12 million respectively, dominated by MSMEs. Meanwhile, the value of card-based payments using ATM, debit and credit cards reached Rp662.39 trillion in the reporting period, down 0.39% (yoy).  In terms of rupiah currency management, total currency in circulation in November 2023 grew 5.69% (yoy) to Rp988.40 trillion. In addition, Bank Indonesia continues ensuring the availability of rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia through programs to circulate the rupiah in 3T (outermost, frontier, remote) regions as well as mobile cash services, cash deposit services and the Sovereign Rupiah Expedition, particularly to meet seasonal demand ahead of the busy Christmas and New Year festive period.