BI Rate Maintained 6,75% - Bank Sentral Republik Indonesia
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October 20, 2019
No. 13/ 17/PSHM/Humas

In the Board of Governors’ Meeting held on May 12, 2011, Bank Indonesia decided to keep the BI rate unchanged at 6.75%. The decision was taken after Board of Governors make overall assessment of macroeconomic developments, particularly the importance of maintaining internal stability (inflation) and external stability (balance of payments). Board of Governors also views that strengthening macroprudential measures to capital inflows is imperative for mitigating the risks of capital reversals and to help the Rupiah movements in line with exchange rate movements among Asian region. Going forward, Bank Indonesia will continue to be vigilant in monitoring the inflation pressures, especially coming from high international commodity prices, accelerating domestic demand, as well as the Government policy regarding fuel subsidy and possible disturbances in the foods supply. Bank Indonesia will continue to strengthen the implementation of monetary and macroprudential policy mix, including through the liquidity management and interest rate response, to maintain macroeconomic stability and to keep inflation within the targets of 5%±1% in 2011 and 4.5%±1% in 2012.

Board of Governors views that the Indonesian economic performances are more robust. The economic growth in Q1-2011 stood at 6.5% (yoy), supported particularly by strong export performance and accelerating investments. Bank Indonesia believes that this robust economic performance will continue to persist in Q2-2011, cementing the optimism that economic growth in 2011 will reach toward the upper band of 6.0-6.5% forecast range. Export is expected to remain a key driver for the economic growth, reinforcing the accelerating investment and sound consumption. From the supply side, economic growth will be supported by manufacturing sector, transportation and communication sector, as well as financial sector.

Indonesia’s balance of payments is estimated to record a sizable surplus in Q2-2011. Both current account as well as capital and financial account will continue to remain in surpluses. Export performance will remain solid, owing to strong demand and high commodity prices. Meanwhile, import growth is also expected to remain relatively high to meet the accelerating domestic demand, including for oil, materials and capital goods. From the capital and financial account, capital inflows will remain high, not only in the forms of portfolio inflows but also Foreign Direct Investment (FDI). The net international reserves at end-April 2011 reached at 113.8 billion US dollars, equivalent to 6.7 months of imports and official external debt services.

Along with continuing strong capital inflows, Rupiah continued to appreciate in April 2011. In the month of April 2011, Rupiah appreciated by 1,68% (ptp) to Rp 8.564 per US dollar, with its volatility remained in check. The strengthening of the Rupiah was attributable to investor’s positive perception to the solid Indonesian economic fundamentals. Bank Indonesia believes that the Rupiah appreciation is consistent with the efforts to contain inflationary pressures and at the same time is still conducive to maintaining the momentum of economic growth. Thus far, Rupiah appreciation does not have negative impacts to maintaining competitiveness of domestic products, and therefore export performance is likely to remain strong.

With respect to price, even though April 2011 recorded another deflation, Bank Indonesia views that the risks of inflation going forward remain high. The CPI inflation in April 2011 decelerated to 6.16% (yoy), following another deflation of 0.31% (mtm) due to further corrections in the food prices following Government measures to address the supply and distribution of staple foods. Although recorded deflation in the last two months and continues in downward trend, volatile food inflation is still relatively high. At the same time, core inflation also showed an upward trend, recorded at 4.62% (yoy) or 0.25% (mtm) in April 2011. The upward trend in core inflation was partly driven by increasing international commodity prices, still relatively high inflation expectation, and increasing domestic demand. Going forward, Bank Indonesia will closely monitor a number of risks that may accelerate inflation pressures, including those related to high international commodity prices, accelerating domestic demand, the availability of foods supply, as well as the Government policy towards fuel subsidy.

Financial system stability remains sound, accompanied by improvements in the banking intermediation functions and ample liquidity conditions. The overall banking industry capital adequacy ratio (CAR) remains strong at above 17% while the (gross) non-performing loans (NPLs) are managed at a safe level below 5%. Improvements in banking intermediation are reflected in the rising trend of credit growth, recorded at 23.8% (yoy) in April 2011, supported by credit expansions in all sectors and categories including credit to MSMEs.

The complete report of the deliberations of the Board of Governors’ Meeting for May 2011, featuring the macroeconomic developments and monetary policy responses, will be presented in the Monetary Policy Review (MPR) on the Bank Indonesia website.

Jakarta, 12 May 2011
Office of the Governor

Difi A. Johansyah
Head of Bureau

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