BI Rate Falls 50 Bps - Bank Sentral Republik Indonesia
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May 24, 2019

No. 11/7/PSHM/Humas

Today, Bank Indonesia decided to lower the BI Rate by 50 bps to 7.75%. This decision was taken after in-depth analysis and comprehensive evaluation of economic and financial developments in Indonesia and worldwide, with particular attention to the ongoing global financial crisis.

The global economic slowdown is taking a steeper turn, reflected in forecasts of greater than expected economic deterioration in developed countries. Global financial markets remain in precarious condition in keeping with losses reported by growing numbers of world financial institutions. The economic slowdown in developed nations has led to decline in Indonesia’s export performance that will ultimately impact the economy as a whole. The worsening condition of global financial markets has rekindled negative sentiment over emerging market countries that may potentially bear down on the economies of some nations, including Indonesia.

Slowing export performance has put pressure on Indonesia's balance of payments, which nevertheless remains within safe limits. International reserves currently stand at 50.56 billion US dollars, still adequate for 5.4 months of imports and servicing of official external debt. These reserves will be reinforced by funds from the sale of recently issued Government global bonds valued at USD 3 billion.

Inflationary pressure was again low in February at 0.21% (mtm), well below the historical average, bringing the annual rate of inflation down from January 2009 to 8.6% (yoy). Key to the mild inflationary pressure in February were improving inflation expectations bolstered by adequate supplies of staple goods and lower fuel prices. Also contributing to the subdued inflationary pressure was reduced imported inflation in line with lower international commodity prices.

The Indonesian banking system remains in stable condition reflected in developments in a range of bank financial and soundness indicators. The condition of banking liquidity, including liquidity flows on the interbank money market, has begun to show improvement in comparison to recent months. However, lending contracted 2.1% in January 2009 due to the weakening of the economy and the cautious stance of banks in extending credit. Even so, Bank Indonesia still notes an upward trend in credit risk that may potentially lead to mounting NPLs in the banking industry.

Bank Indonesia forecasts economic growth at 4% in 2009, with considerable downside risk if global economic growth worsens even more than expected. Indications of the economic slowdown are also borne out in slowing household consumption brought on by falling public purchasing power, as well as the stagnating trend in M1 growth. Nevertheless, this will also ease future inflationary pressure and thus maintain a trend towards the lower limit of the 5%-7% range.
 Bank Indonesia will consistently monitor developments in economic and financial conditions and take the necessary measures to reinforce the domestic economy, macroeconomic stability and financial system.

A full report on the deliberations of the Board of Governors Meeting in March 2009, presenting the latest developments in monetary conditions, inflation and the exchange rate, will be presented in the Bank Indonesia Monetary Policy Review (MPR). This report may be accessed on the Bank Indonesia website (http://www.bi.go.id) from 10 March 2009.


Jakarta, 4 March 2009
Office of The Governor

Didy Laksmono R.
Head of Bureau

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