BI Rate Maintained at 5.75% - Bank Sentral Republik Indonesia
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April 18, 2019
No. 14/33/PSHM/Humas

In the Board of Governors' Meeting convened on October 11 2012, Bank Indonesia decided to hold the BI rate steady at 5.75%. The current policy rate is considered consistent with inflation forecast, which is expected to remain low and contained within its target range of 4.5%±1% in 2012 and 2013. Bank Indonesia will continue to focus on policies to maintain external balance while also providing support for domestic economic growth. Board of Governors sees that some policy measures that have been taken, have encouraged lower deficit in the current account. Meanwhile, Indonesia’s economic growth remains sound, albeit lower than earlier forecast, mainly reflecting a continued slowdown in the global economy. Going forward, Bank Indonesia will continue to assess the effect of some policies that has been taken and will take further policy measures if neccessary, by also considering the dynamics of the economy. Bank Indonesia will also continue to strengthen coordination with the Government in managing domestic demand and improving Balance of Payment, so that it remains in line with the effort to maintain macroeconomic stability and sustainable economic growth.

Board of Governors remains vigilant on the development of the global economy, which is weaker than expected and continue to be oveshadowed by uncertainty. Recovery in the US remains tepid, while the economy in the euro area remains weak as crisis continues. In addition, China’s and India’s economic growth are expected to slow. Global inflation is also expected to remain moderate, indicating declining global commodity prices. Under such circumstances, some countries had opted to take more accomodative policies to boost economic recovery. Those policies have triggered positive sentiment in the global financial market, including capital inflow to emerging markets.

Board of Governors sees Indonesia’s economy remains sound, albeit lower than earlier forecast. In the Q3-2012, Indonesia’s economy is expected to chart 6.3% growth, lower than earlier forecast, mainly reflecting a slowdown in the global economy. Although growth in domestic demand-oriented consumptions and investments remain high, declining exports have adversely affected production and investment in exports-oriented sector. Going forward, growth will remain underpinned by buoyant domestic demand and the potential increase in exports, although uncertainty in the global economy still call for caution. This is also supported by robust growth in some regions, mainly in the eastern part of Indonesia (KTI) and Java. With that condition, Indonesia’s economic growth in 2012 and 2013 is expected to arrive at 6.1%-6.5% and 6.3%-6.7% respectively.

Balance of Payment in the Q3-2012 is expected to improve and turn to surplus, supported by better current account as well as higher surplus in capital and financial account. Current account deficit in Q3-2012 is expected to be lower than that in Q2-2012. This was indicated by a surplus in the trade balance in August 2012. On the other hand, surplus in the capital and financial account is expected to pick up, driven by favorable portfolio inflow and Foreign Direct Investment. At the end of September 2012, international reserves reached USD110.2 billion, or equivalent to 6.1 months of imports and government’s external debt services.

Rupiah in September 2012 moved according to market condition, with abated depreciating pressure. This is consistent with Bank Indonesia’s policy to stabilize rupiah, as suggested by its fundamental. On point-to-point basis, Rupiah depreciated by 0.37% (mtm) to Rp9,570 per USD, or on average depreciated by 0.64% (mtm) to Rp9,554 per USD. Pressure on Rupiah was mainly associated with strong imports that lead to high demand for foreign currency. Pressure on Rupiah was subdued as measures to boost global economy and the prospects of the Indonesia’s economy have attracted more capital inflow to Indonesia.

Inflation subdued and contained at a low level. CPI inflation in September 2012 was recorded at 0.01% (mtm) or on an annual basis was recorded at 4.31% (yoy). Core inflation was at a low level (4.12%, yoy) as demand soften after Eid al- Fitr festivities and correction in the global commodity prices, as well as well-anchored inflation expectation. Volatile food inflation was lower, on the back of sharp correction in the global food prices and adequate supply, coupled with intensive measures by the government to manage food prices. Administered prices inflation was also in check as there was no change in government policy on the prices of strategic commodities.

Financial system stability is well-maintained with improving intermediation function to support economic financing. Banking industry shows solid performance, as indicated by secured level of capital in which capital adequacy ratio (CAR) is well above minimum level of 8%, and gross non-performing loan (NPL) below 5%. Meanwhile, banking intermediary remains sound, reflected by credit growth in August 2012 that reached 23.6% (yoy). The credit growth is lower than that in earlier month of 25.22% (yoy), driven by lower growth in working capital credit of 23.2% (yoy), while consumption credit remain stable at 19.9% (yoy). Investment credit recorded a high growth of 29.8% (yoy), and is expected to boost Indonesia’s economic capacity.

Going forward, Bank Indonesia remains vigilant on the dynamics of the global economy and financial market and its impact on the Indonesia’s economy. Bank Indonesia will continue to focus on policies to maintain external balance while also providing support for domestic economic growth. In addition, Bank Indonesia will continue to assess the effect of some policies that has been taken and will make an adjustment align with the dynamics of the economy. Bank Indonesia will also continue to strengthen coordination with the Government in managing domestic demand and improving Balance of Payment, so that it remains in line with the effort to maintain macroeconomic stability and sustainable economic growth

A complete report of the October 2012 Board of Governors’ Meeting, presenting macroeconomic developments and monetary policy will be published in the Monetary Policy Report (MPR). This publication is accessible through Bank Indonesia’s website.

Jakarta, 11th October 2012
Head of Office of the Governor

Dody Budi Waluyo
Executive Director

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