Bank Indonesia Cuts BI Rate 25 bps to 7.00% - Bank Sentral Republik Indonesia
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April 18, 2019

No. 11/17/PSHM/Humas

Today, Bank Indonesia decided to lower the BI Rate by 25 bps to 7.00%, following a comprehensive evaluation of domestic and international economic developments.

During Q1/2009, the Indonesian economy maintained growth at 4.4%, primarily on the strength of expansion in household and government consumption. Amid the uncertainty over global economic recovery, pressure on Indonesia’s exports persists from the ongoing economic contraction in major trading partner nations, despite early indications of improvement in the world economy. In the overall forecast for 2009, Bank Indonesia predicts economic growth to remain strong in the 3%-4% range.

Concerning prices, inflationary pressure continues to ease in response to appreciation in the rupiah and subdued price movements for staple goods. Inflation until May 2009 measured only 0.1% (ytd) or 6.04% (yoy), with the inflation outlook for end-2009 still on track with the original forecast in the 5%-7% range. Bank Indonesia is constantly monitoring the potential for inflationary pressure in 2010 in view of predicted increases in some world commodity prices.

The recent strengthening of the rupiah represents a positive contribution to overall macroeconomic stability. The improvement in Indonesia’s balance of payments and more robust international reserves are key factors in rupiah exchange rate stability. At end-May 2009, international reserves stood at 57.9 billion US dollars, sufficient for more than 6 months of imports and servicing of official external debt.

In the financial sector, the Indonesian banking system remains in secure condition with a robust CAR at 17.6%. Banking liquidity, including liquidity on the interbank market, has improved further alongside expansion in depositor funds. Added to this are early indications of increased lending by banks. Even so, Bank Indonesia maintains a close watch on potential for escalation in credit risk. NPLs gross and net have widened marginally from 4.5% and 1.95 to 4.6% and 2.0%. However, banks continue to show only limited response to reductions in the BI Rate, as demonstrated in credit growth and cuts in loan interest rates that still fall short of expectations. To address this, Bank Indonesia will keep working closely with the banking system to remove obstacles to improvement in the bank intermediation function.

A complete report on the deliberations of the June 2009 Board of Governors’ Meeting, with developments in monetary aggregates, inflation and the exchange rate during May 2009, is presented in the Monetary Policy Review (MPR) on the Bank Indonesia website (http://www.bi.go.id).

Jakarta, 3 June 2009

Dyah N.K. Makhijani
Director

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