Monetary Policy: Bank Indonesia Leaves Interest Rates Unchanged in December
In line with expectations, the central bank of Indonesia (Bank Indonesia) left its interest rates unchanged at the last monetary policy meeting of 2018 (held on 19-20 December 2018). The benchmark BI 7-Day Reverse Repo Rate was held at 6.00 percent, while the deposit facility and lending facility rates were kept at 5.25 percent and 6.75 percent, respectively.
In a statement Bank Indonesia said it “believes that the policy rate is still consistent with efforts to reduce Indonesia’s current account deficit as well as maintain the attractiveness of domestic financial assets with due consideration to global interest rate trends in the next few months”. Just like the statement that was released after the November 2018 policy meeting, the central bank did not make a specific reference to the rupiah exchange rate to substantiate its decision, whereas prior to November, concern about the fragile rupiah was the basis for monetary policy decisions (and was mentioned explicitly in Bank Indonesia statements).
But November 2018 was a month in which the rupiah experienced very strong – and unexpected – appreciation against the US dollar, while the rupiah performed relatively stable against the US dollar in December 2018. It therefore seems that Bank Indonesia is comfortable with the rupiah exchange rate around IDR 14,500 per US dollar.
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This articles discusses:
• the latest monetary policy decisions that were taken by Bank Indonesia
• the external and domestic challenges (that influence Indonesia's monetary policy)
• our forecast for the benchmark interest rate in 2019
Read the full article in the December 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
