BI Rate Maintained at 5.75% - Bank Sentral Republik Indonesia
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August 21, 2019
No. 14/35/PSHM/Humas

In the Board of Governors' Meeting convened on November8 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. In line with the dynamics of the economy and some policy measures that have been taken, external imbalances have started to improve, with declining current account deficit and the overall balance of payments that have turned to surplus. Rupiah also moved according to market condition, with abated depreciating pressure. Meanwhile, Indonesia’s economic growth remains sound, although slowed slightly as exports fell, reflecting a continued slowdown in the global economy. Bank Indonesia will continue to focus on policies to manage external balance to a sustainable level while also providing support for economic growth. Bank Indonesia will also continue to strengthen coordination with the Government to maintain macroeconomic stability and sustainable economic growth.

Board of Governors sees Indonesia’s economic growth remains sound, although slowed slightly. In the Q3-2012, Indonesia’s economy  charted 6.2% growth, slighlty lower than earlier forecast, reflecting a continuing slowdown in exports. Buoyant domestic demand, mainly private consumptions and investment, continued to underpin growth. Going forward, Indonesia’s economic growth is expected to pick up supported by strong private consumption and investment. Exports is also expected to perform better, supported by improvement in some of Indonesia’s main trading partner countries, although remains overshadowed by uncertainty in the global economy. With that condition, Indonesia’s economic growth in 2012 is expected to arrive at 6.3% and pick up to 6.3%-6.7% in 2013.

External imbalances have improved, as expected. Current accounts deficit in the Q3-2012 went down to 2.4% of GDP from 3.5% of GDP in the Q2-2012. Improvement in the current account balance was associated with better trade balance, as imports fell sharply, especially on consumer goods, while some non oil and gas exports commodities such as CPO has started to post positive growth. Capital and financial accounts posted a higher surplus, mainly driven by Foreign Direct Investment (FDI), and bring the overall balance in Q3-2012 to surplus. Going forward, the overall balance of payments in Q4-2012 is expected to record higher surplus, supported by lower current account deficit and increasing surplus in the capital and financial account , mainly in the form of  FDI. At the end of October 2012, international reserves picked up and reached USD110.3 billion, or equivalent to 6.1 months of imports and government’s external debt services.

Rupiah 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 0.36% (mtm) to Rp9,605 per USD, or on average depreciated by 0.41% (mtm) to Rp9,593 per USD. Subdued pressure on Rupiah was associated with lower deficit in the current account and the overall balance of payments that have turned to surplus. Capital inflow, both in the form of FDI and portfolio investment, continue to pick up supported by yield on rupiah-denominated assets which remains attractive, as well as sound economic prospects and fundamental.

Inflation remained contained and at the end of 2012 is expected to arrive at around the mid-point of the target range of 4.5%±1%. CPI inflation in October 2012 was recorded at 0.16% (mtm) or on an annual basis was recorded at 4.61% (yoy). Core inflation remained manageable, although slightly picked up to 4.59% (yoy), driven mainly by inflation in housing contracts and rent prices. From a fundamental standpoint, manageable core inflation was driven by lower imported inflation in line with declining global food and energy prices as well as relatively stable rupiah. Some other factors that also contributed to manageable core inflation were well-anchored inflation expectation and favorable supply side response. Volatile food recorded a deflation as there was a price correction in the food commodities, supported by better supply.  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 September 2012 that reached 22.9% (yoy). The credit growth is lower than that in earlier month of 23.6% (yoy), driven by lower growth in working capital credit of 21.9% (yoy), while consumption credit remain stable at 19.6% (yoy). Investment credit recorded a high growth of 30.4% (yoy), and is expected to boost Indonesia’s economic capacity.

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

Jakarta, 8th November 2012
Head of Office of the Governor

Dody Budi Waluyo
Executive Director

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