BI Rate Remains at 6.5% - Bank Sentral Republik Indonesia
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October 25, 2020

No. 11/ 35 /PSHM/Humas

In the final Board of Governors' Meeting for 2009, Bank Indonesia has decided to keep the BI Rate at 6.5%. Following an evaluation of the economy in 2009 and deliberation of the future economic outlook, the Board of Governors believes that the monetary relaxation brought about by the 300 bps decline in the BI Rate offers ample support for the economic recovery process and bank intermediation. At 6.50%, the BI Rate is also deemed consistent with achievement of the inflation target for 2010, set at 5%±1%.

In the opinion of the Board of Governors, the Indonesian economy in 2009 has manifested considerable resilience in responding to the global economic crisis. Monetary relaxation and the fiscal stimulus for the domestic economy have provided a boost to consumer confidence, with the result that household consumption has maintained brisk growth during the year. Bank Indonesia is confident that the resilience of the domestic economy, coupled with the ongoing recovery in the world economy and growing confidence among economic actors, provides a strong platform for future actions to bolster economic growth momentum. For 2009 overall, Bank Indonesia forecasts Indonesia's economic growth to reach 4.3%. In 2010, the Indonesian economy is forecasted to grow in the range of 5.0%-5.5%, with growth in 2011 climbing to 6.0%-6.5%. This improving growth trend is predicted alongside more rapid recovery in the world economy, steady improvement on financial and banking markets and the secure condition of domestic fundamentals.

In regard to prices, the Indonesian economy in 2009 has charted remarkably low inflation. In November 2009, the Consumer Price Index (CPI) recorded 0.03% deflation (mtm) alongside annual inflation at 2.41% (yoy). Accordingly, potential inflation in 2009 to come below the Bank Indonesia inflation target set at 4.5%±1%. In 2010 and 2011, inflation is predicted to hold within the range of 5%±1%.

In the financial sector, the banking system has shown improved response to the loose bias monetary stance, although the decline in lending rates has fallen short of expectations. While credit recorded only limited expansion in 2009, credit growth in 2010 is forecasted to reach 15%-20% in response to rising confidence among economic actors in the economic growth outlook. Aggregate banking liquidity remains sufficient for banking activity in financing for the economy. At the micro level, the continued stable condition of the banking industry is reflected in the robust 17.6% CAR and comfortably safe level of NPLs gross at less than 5%. The Board of Governors is optimist that the banking system will remain in secure condition during 2010.

>Looking forward, the monetary policy stance is directed towards maintaining consistently low inflation while making adequate provision for measures to strengthen economic recovery. Various measures will be pursued to strengthen the effectiveness of monetary policy transmission, including banking efficiency improvements. Reinforcing this will be actions to resolve structural issues in inflation arising from administered prices and volatile foods, involving more optimum coordination with the central and regional governments.

A complete report of the deliberations of the December 2009 Board of Governors’ Meeting, presenting macroeconomic developments, monetary policy and the outlook for 2010 and 2011, will be published in the Monetary Policy Review (MPR).

Jakarta, 3 December 2009
Directorate of Strategic Planning
and Public Relations

Dyah N.K. Makhijani



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