Bank Indonesia leaves BI Rate at 6.5% - Bank Sentral Republik Indonesia
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October 21, 2020

No. 11/ 29 /PSHM/Humas

Today, Bank Indonesia decided to keep the BI Rate on hold at 6.5%. The decision to leave the BI Rate unchanged was taken after the Board of Governors' Meeting reached the conclusion that the BI Rate at the current 6.50% level remains consistent with achievement of the 5%±1% inflation target for 2010. The present policy stance is also regarded as still conducive to the economic recovery and banking intermediation processes.

Based on the available data and analysis of the economy, the Bank Indonesia Board of Governors' Meeting forecasts Q3/2009 domestic economic growth to reach 4.2%, ahead of the earlier 3.9% projection. The strengthening global economic recovery and upsurge in consumer confidence have led to higher than predicted improvement in exports and private consumption. The invigorated economic growth is also consistent with the BI assessment of economic performance in the regions. Regions producing CPO, rubber, nickel and coal for export, such as Sumatra, Kalimantan, Sulawesi and Papua, are enjoying relatively buoyant economic growth. Alongside this, renewed improvement is reported for investment in some regions.

Bank Indonesia predicts that the Indonesian economy in 2009 and 2010 may chart faster than expected growth. Growth in 2009 is projected to reach 4.0%-4.5%, ahead of the earlier 3.5%-4.0% prediction. Similarly, economic growth in 2010 is forecasted at 5.0%-5.5% in response to accelerated export growth, consistent with predictions for global economic recovery, continued strength of private consumption and the onset of more robust investment activity. Risks calling for vigilance include the continued uncertainty over the global economic recovery process, high unemployment in advanced countries and protectionist tendencies in some nations in the aftermath of global crisis. Added to this, close watch must also be kept on the risk of escalating world oil prices.

The Board of Governors' Meeting at Bank Indonesia regards economic and monetary stability as firmly under control, as reflected in the stable exchange rate and low inflation. Inflation in 2009 is forecasted within the 4.5%±1% targeting range. Looking forward, inflation is predicted to return to normality in the range of 5±1%, in keeping with renewed strength in the domestic economy and commodity prices.

In the financial sector, financial system stability remains secure with the support of improving performance in the banking sector. Improvement has been visible in banking intermediation, particularly since August 2009. At the micro level, the banking industry is in stable condition as indicated by continued high levels of capital adequacy at 17.0% and NPLs safely below 5%. Loan interest rates continue to show gradual decline. Aggregate banking liquidity remains adequate to support bank financing of the economy. The Bank Indonesia decision to introduce a secondary 2.5% statutory reserves requirement effective from 24 October 2009 (after a 1-year transition period) is expected to strengthen bank liquidity management.

A complete account of the deliberations of the October 2009 Board of Governors’ Meeting, presenting macroeconomic developments, monetary policy and the economic outlook for 2009 and 2010, will be published in the Monetary Policy Report (MPR).

Jakarta, 5 October 2009
Bank Indonesia
Office of the Governor

Dyah N.K. Makhijani



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