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

In the Board of Governors’ Meeting held on Thursday June, 9, 2011, Bank Indonesia decided to keep the BI rate unchanged at 6.75%. Board of Governors view that the overall economic performance is strong, accompanied by continuing large capital inflows and trend in Rupiah appreciation albeit at moderated levels. Inflation pressures are decelerating with continuing correction in the food prices. Going forward, Bank Indonesia remains vigilant on a number of risks that may put pressures on overall macroeconomic stability, particularly with continuing large capital inflows, acceleration in domestic demands, and renewed pressures on inflation outlook toward 2012. Bank Indonesia will strengthen the policy mix of monetary and followed-up macroprudential measures, with a focus on managing capital inflows and domestic liquidity, along with exchange rate appreciation in line with exchange rate appreciation in the Asian region. Bank Indonesia is strongly confident that the implementation of these monetary and macroprudential policy mix can secure macroeconomic stability and keep inflation within the targets, that is, 5%±1% in 2011 and 4,5%±1% in 2012.

Board of Governors view that Indonesian economic performance is continuously stronger. In Q2-2011, domestic economic continues to expand and stronger than previously forecasted, supported particularly by improving export performance in line with larger world trade volume and the rise in international commodity prices. Meanwhile, the growth of investment and household consumption is predicted to remain strong, buttressed by optimism on the economy as well as the rise in purchasing power of consumers. The economic expansion is still supported by the growth of transportation and communication sector, industry sector, as well as financial sector. The continuing robust domestic economic activities confirm the outlook of economic growth to potentially reach the upper bound of 6.0-6.5% in 2011.

Indonesia’s balance of payment in Q2-2011 is estimated to record a sizable surplus. The stronger domestic and external economies have boosted the increase in imports, particularly oil and gas, to meet domestic consumption. That condition results in the decrease of current account surplus compared to previous quarters. In capital and financial account, however, positive perception of investors on Indonesia’s economic fundamentals amid attractive return of domestic assets boosts foreign direct investment (FDI) and the inflows of portfolio investment. This condition results in a higher capital and financial account surplus compared with the surplus in Q1-2011, and more than compensate the declining current account surplus. At the end of May 2011, the international reserves reached USD 118.1 billion, or equivalent to 6.9 months of imports and external debt services of the Government.

Rupiah continues to appreciate, albeit at moderated level, along with continuing capital inflows. In May 2011, rupiah appreciated by 0.33% (ptp) to Rp 8,536 per USD with volatility remained in check. The continuing trend of Rupiah appreciation is in line with Bank Indonesia efforts to mitigate inflation pressures, particularly those stemming from imported inflation, with pay due regard to its impact to economic growth. Bank Indonesia believes that these Rupiah appreciation that in line with exchange rate appreciation in the Asian region does not put negative impacts to export performance, as shown at continuing strong export growth along with high international commodity prices and strong external demands.

The CPI inflation continues to decline, while the core inflation is still in increasing trend. The CPI inflation in May 2011 recorded 5.98% (yoy), or 0.12% (mtm), mainly driven by the continuing correction in inflation of food prices. Inflation of administered prices also remains in check in line with the absence of Government policy on the prices of strategic commodities. Nevertheless, core inflation is in a rising trend, reaching 4.64 (yoy) or 0.27 (mtm). The continuing increase in core inflation is driven by the increase in global commodity prices, accelerating domestic demand, and relatively high inflation expectation. Going forward, Bank Indonesia is continuously vigilant to these risks on accelerating core inflation pressures, as well as inflation pressures that may rise from Government policy relating to fuel and electricity subsidies.

Banking system stability remains sound with accelerated credit growth. Banking sector shows stable development, as reflected by high capital adequacy ratio (CAR) is managed above minimum 8% while the ratio of non-performing loans (NPLs) is managed below 5%. Meanwhile, credit disbursement to finance economic activities is continuing, as reflected by credit growth in May 2011 that reached 23.3% (yoy). Bank Indonesia will continuously monitor banking sector condition and improve the sector efficiency so that intermediation function can be optimized.

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

Jakarta, 9 June 2011
Office of the Governor

Benny Siswanto
Head of Bureau

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