BI Rate Maintained 6,0% - Bank Sentral Republik Indonesia
Navigate Up
Sign In
April 19, 2019

No. 14/ 1 /PSHM/Humas

In the Board of Governors' Meeting convened on 12 January 2012, Bank Indonesia decided to keep the BI rate unchanged at 6.00%. Board of Governors views that current BI rate is still consistent with inflation targets, financial system stability, and remains conducive to propel domestic economic expansion amidst global economic uncertainty. In 2011, Indonesian economy showed strong performance with low inflation, higher economic growth, stable exchange rate, and stable financial system. The achievement was supported by various policies implemented by Bank Indonesia and the government. Going forward, Bank Indonesia will monitor closely the worsening global economic condition. Regarding the policy, Bank Indonesia will continue to strengthen monetary and macro-prudential policy mix, as well as coordination with the government. Board of Governors is confident that the implementation of countercyclical monetary and macro-prudential policy mix is crucial in managing the economy and keep inflation within its targets, that is, 4.5%±1% for 2012 and 2013.

Board of Governors noted that the global economic and financial performance is still weakening along with protracted crisis in Europe. The world economic growth is predicted to be lower with consumption in developed economies tends to be stagnant and high unemployment. This condition leads to the decrease in emerging markets’ exports. Meanwhile, the turmoil in global financial markets continues in line with the prolonged crisis resolution in Europe such that liquidity in financial markets tends to be tight with increasing risks. Moreover, global financial markets are also overshadowed by the risks of lower rating of some European countries that triggers negative sentiment. Regarding inflation, global inflationary pressures tend to decrease in line with the declining trend in international commodity prices. With that development, to anticipate the impact of global economic weakening amidst abated inflation trend, global monetary policy responses tend to be accommodative.

On the domestic side, Boards of Governors is confident that Indonesian economic growth in 2011 is quite strong along with well-maintained macroeconomic and financial system stability. Economic growth in the fourth quarter of 2011 is predicted at 6.5%, supported by strong private consumption and investment along with good export performance albeit slightly slowing. Overall 2011, economic growth is predicted at 6.5%, higher than the growth in the previous year at 6.1%. Based on production sectors, this strong economic growth is led by manufacturing sector, transportation and communication sector, as well as trade, hotel and restaurant sector.

Indonesia’s balance of payments in 2011 is predicted to chart a considerable surplus although it experienced pressures in the second half of the year. The pressures are mainly on the capital and financial account due to higher uncertainty in the global financial markets and economy. In addition, current account in the fourth quarter of 2011 also started to experience pressures due to increased imports. In line with that development, international reserves at the end of December 2011 reached USD110.1 billion, or equivalent to 6.3 months of imports and external debt services of the Government.

Rupiah exchange rate during 2011 in average appreciated by 3.56% compared to the average in 2010. Depreciation pressures in the second half of the year were mainly driven by worsening market sentiments related due debt crisis in Europe. In addition, high demand of foreign exchange for domestic needs, among others due to increased imports, also put pressures on Rupiah in the second half of 2011. Bank Indonesia has implemented a number of policies to mitigate the pressures on Rupiah exchange rate that it remains in line with fundamentals and exchange rate competitiveness of other currencies in the region. To maintain the stability of domestic markets, Bank Indonesia continues to monitoring the developments of Rupiah and ensures the adequacy of Rupiah and foreign exchange liquidity.

Inflation in 2011 was recorded at 3.79%, decreased sharply from inflation in 2010 (6.96%) such that slightly lower than inflation target at 5%±1% (yoy). The achievement of that low inflation rate was supported by relatively stable core inflation, low volatile food prices inflation, and minimum administered prices inflation. Stable core inflation was supported by monetary and exchange rate policy in managing demands, imported inflation, and expected inflation. On the other hand, low inflation of volatile food prices was supported by government policy in securing adequate supply and distribution, as well as food prices stabilization. Meanwhile, fiscal policy on energy subsidy resulted in low administered prices inflation. The collaboration between Bank Indonesia and the government in controlling inflation is also supported by a better coordination, among others, through inflation taskforce at national level (TPI) and regional level (TPID).

Financial system stability remains under control with improving banking intermediation. Supported by various policies implemented by Bank Indonesia, banking industry has been more resilient, as indicated by secure level of capital with capital adequacy ratio (CAR) well above minimum level 8%, and gross non-performing loan (NPL) below 5%. Meanwhile, credit growth until November 2011 reached 26.0% (yoy), in which investment credit, working capital credit, and consumption credit grew by 36.0% (yoy), 22.2% (yoy), and 26.0% (yoy), respectively.

Going forward, Board of Governors is confident that the outlook of Indonesian economy remains strong amidst global economic uncertainty. In the first quarter of 2012, economic growth is predicted to reach 6.5%, supported by strong investment and private consumption. Investment grade obtained by Indonesia in December 2011 is expected to boost investment. Meanwhile, export is predicted to continue growing although decelerating due to the weakening of global economy. Overall in 2012, economic growth is predicted to reach 6.3%-6.7%, and will accelerate to 6.4%-6.8% in 2013 due improving global economy in 2013. Regarding domestic prices, Board of Governors predicts that inflation can be controlled towards its target, that is, 4,5%±1%.

Board of Governors will continue to be vigilant on the risks to Indonesia’s macroeconomic stability, including high uncertainty in the global economy, particularly related to the prolonged crisis resolution in Euro area. Bank Indonesia will continue to optimize the role of monetary policy in boosting economic capacity, maintaining financial market stability, and mitigating the impacts of global economic slowdown, while at the same time anchoring inflation expectation. Going forward, Bank Indonesia will continue to strengthen the policy mix through interest rate response, exchange rate policy, macro-prudential policies for capital flows management, macro-prudential policies for liquidity management, and policy coordination with the government.

A complete result of the January 2012 Board of Governors’ Meeting, presenting macroeconomic developments and monetary policy, will be published in the Monetary Policy Report (MPR).

Jakarta, 12 January 2012
Office of the Governor

Difi A. Johansyah
Head of Bureau

Tags:  

Survey

Is this article give you useful information?
Rate this article:
Comment:
Show Left Panel