BI Rate Increased 25 bps to 9% - Bank Sentral Republik Indonesia
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April 19, 2019

No. 10/38/PSHM/Humas

In the Board of Governors' Meeting held today, Bank Indonesia decided again to raise the BI Rate by 25 bps to 9.0%. This decision was taken to bolster the stability of the Indonesian economy and financial system and specifically to support the medium-term outlook for the inflation target.

"In Bank Indonesia's view, the economy still faces the risk of future inflationary pressure from turbulent oil and food commodity prices on the world market, in addition to domestic demand pressures," explained Bank Indonesia Governor Boediono after the meeting. The persistently high risk of inflationary pressure was a key consideration for Bank Indonesia in the renewed increase in the BI Rate this month.  Nevertheless, the inflationary impact of the fuel price hike has significantly eased. To reinforce monetary policy effectiveness, the decision to raise the BI Rate was taken in tandem with optimisation of other monetary policy instruments for control exchange rate volatility and absorption of excess liquidity in Open Market Operations (OMO). Under this integrated policy, the targeted inflation of 6.5%-7.5% in 2009 is regarded as achievable.

The 25 bps hike in the BI rate in August 2008 is not expected to adversely impact economic activity in Indonesia. Various indicators point to continued robust domestic demand. Banking industry resilience remains strong, supported by the healthy operation of the intermediary function. Bank credit expansion is forging ahead at 31.6% (yoy) with NPLs down at 4.08% (gross). Motor vehicle and cement sales are on a robust upward trend. In 2008, the Indonesian economy is forecasted to maintain vigorous growth on the strength of increases in exports, private consumption and government spending. Domestic demand will also be bolstered by escalating regional government expenditures and the onset of preparations for the national elections in 2009.

Monthly inflation in July 2008 reached 1.37% with the annual rate of inflation at 11.90% compared to 11.03% in the preceding month. This brings inflation for January-July 2008 to 8.85%, well above the 2.72% charted for the same period one earlier. After taking account of the various risks and inflationary pressure expected to last through the end of the year, Bank Indonesia forecasts CPI inflation at end-2008 in the range of 11.5%-12.5% (yoy). At the same time, further improvement is predicted in the balance of payments, which augurs for continued exchange rate stability. International reserves at end-July 2008 were recorded at USD 60.56 billion, equivalent to 4.7 months of imports and servicing of official foreign debt.

The Board of Governors will consistently evaluate the outlook for the economy and inflation based on the latest available information in order to maintain an optimum monetary policy stance for the future.


Jakarta, 5 August 2008
Directorate of Strategic Planning
and Public Relations

Dyah N.K. Makhijani
Director

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