The central bank of Indonesia (Bank Indonesia) decided to maintain its key interest rate (BI rate) at 7.50 percent at Tuesday’s Board of Governors’ Meeting (14 April 2015). The institution also left its deposit facility and lending facility at 5.50 percent and 8.00 percent, respectively. Bank Indonesia considers this level to be effective in order to push the country’s inflation rate back into its target range of 3-5 percent (y/y) in both 2015 and 2016. It is also convinced that this interest rate environment will improve the current account balance.

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The central bank of Indonesia (Bank Indonesia) announced that the country’s foreign exchange reserves fell by USD $3.9 billion to USD $111.6 billion at the end of March 2015 as the central bank used part of the forex reserves to support the Indonesian rupiah which had started to depreciate markedly due to bullish US dollar momentum amid further looming monetary tightening in the USA. The rupiah had fallen to a 17-year low of IDR 13,237 per US dollar in mid-March as market players are anticipating an interest rate hike in the USA.

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The central bank of Indonesia (Bank Indonesia) estimates that Indonesia’s inflation rate in March will be around 0.3 to 0.4 percent month-to-month (m/m), slightly higher than its earlier forecast of around 0.28 percent (m/m). Later this week, Statistics Indonesia will release the country’s March inflation figure. In February inflation eased to 6.29 percent year-on-year (y/y) - from 6.96 percent (y/y) in the preceding month - amid declining fuel and food prices despite some inflationary pressures caused by higher rice prices.

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Nilai tukar rupiah mengawali minggu ini dengan posisi kuat karena dollar Amerika Serikat (AS) melemah akibat ketidakjelasan mengenai waktu kenaikan suku bunga AS. Kontras dengan dugaan awal, meeting Federal Reserve yang terakhir (diadakan 17-18 Maret) mengindikasikan bahwa belum akan ada kenaikan suku bunga dalam waktu singkat di negara dengan ekonomi terbesar. Hal ini mendorong meningkatnya minat untuk aset-aset pasar negara berkembang. Apalagi, Pemerintah Indonesia dan Bank Indonesia berjanji akan menjaga stabilitas rupiah.

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Bank Sentral Indonesia (Bank Indonesia) memutuskan untuk tetap menjaga suku bunga acuannya pada 7,5% sebagai hasil keputusan pertemuan Dewan Gubernur Bank Indonesia (BI) yang dilakukan hari ini. Suku bunga overnight deposit facility dan suku bunga lending facility dipertahankan masing-masing 5,5% dan 8%. BI menganggap bahwa kondisi suku bunga saat ini sesuai dengan targetnya untuk mendorong inflasi ke dalam target antara 3,0% sampai 5,0% dalam basis year on year (y/y) di tahun 2015 dan mengurangi defisit neraca transaksi berjalan Indonesia antara 2,5% sampai 3,0% dari produk domestik bruto (PDB).

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Setelah serangkaian data ekonomi yang baik (terutama data tenaga kerja di Amerika Serikat) pasar menduga Federal Reserve akan menaikkan tingkat suku bunganya pada kuartal kedua atau ketiga tahun ini dan karenanya dollar Amerika Serikat (AS) dapat bullish momentum (hampir menjadi posisi tertinggi selama 11 tahun terakhir). Karena prediksi yield yang lebih tinggi di AS, modal kembali masuk ke negara dengan ekonomi terbesar di dunia ini. Pada saat yang sama, hal ini menimbulkan kerugian besar pada mata uang di negara-negara berkembang, termasuk nilai tukar rupiah yang turun 6% terhadap dollar AS pada tahun ini.

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The central bank of Indonesia (Bank Indonesia) expects that the country’s trade balance will show a USD $500 million surplus in February 2015 on the back of increased manufacturing exports, the higher price of crude palm oil, and lower oil imports. In January, Indonesia’s trade balance recorded a USD $710 million surplus, divided into a USD $748 million surplus in the non-oil & gas trade balance and a USD $38.6 million deficit in the oil & gas trade balance.

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According to the latest survey of Bank Indonesia (the central bank of Indonesia), the country’s January retail sales accelerated 10.4 percent year-on-year (y/y), up from the 3.3 percentage point growth pace (y/y) in the preceding month. Retail sales in the first month of the year in Southeast Asia’s largest economy accelerated because of higher sales of information & communication equipment (+29.9 percent y/y) as well as food, beverages & tobacco products (+15.1 percent y/y).

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Bank sentral Indonesia (Bank Indonesia) mengumumkan pada hari Jumat (06/03) bahwa cadangan devisa negara bertambah menjadi 115,5 miliar dollar AS pada akhir Februari 2015, naik dari 114,2 miliar dollar AS di bulan sebelumnya. Peyebab utama pertumbuhan ini adalah kenaikan pendapatan ekspor minyak & gas, yang melebihi pembayaran hutang luar negeri Pemerintah. Berita ini menyebabkan sentimen positif di pasar dan berkontribusi pada rekor tertinggi pada penutupan Indeks Harga Saham Gabungan (IHSG) pada hari Jumat.

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One day after the surprise interest rate cut by Indonesia’s central bank, Indonesian stocks surge to a new record level led by interest rate sensitive stocks (such as financial institutions, construction firms and property firms) while the rupiah and government bonds are weakening. Yesterday (17/02), Bank Indonesia shocked markets by lowering its key interest rate (BI rate) and deposit facility rate (Fasbi) by 25 basis points, each, to 7.50 percent and 5.50 percent, respectively. Easing monetary policy is back in fashion among the region’s central banks.

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The decision of Indonesia's central bank (Bank Indonesia) to raise its benchmark interest rate by 50 basis points to 7.00 percent and its deposit facility (Fasbi) by 0.50 percent to 5.25 percent seem to have had a good impact on the value of Indonesia's stocks and the rupiah. Indonesia's benchmark stock index (IHSG) rose 2.23 percent to 4,195.09 points on Friday (30/08), implying a three-day winning streak. Since the first trading day of this year, the IHSG is down 3.47 percent.

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For the second day in a row Indonesia's benchmark stock index (IHSG) was able to post a gain. Today, it rose 1.92 percent to 4,103.59 points. This rebound is possibly the result of the higher key interest rate. Yesterday, it was announced that the central bank (Bank Indonesia) scheduled an extra meeting to discuss monetary policy. Immediately speculation emerged that the BI rate might be raised by 50 basis points. And indeed it was raised, much to the liking of many investors and analysts.

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Indonesia's current account deficit, which caused much alarm among the investor community, is expected to ease to about 2.5 percent of gross domestic product (GDP) in the second half of 2013. This assumption is supported by Indonesia's central bank and various analysts. The country's current account deficit reached USD $9.8 billion or 4.4 percent of GDP in Q2-2013. In combination with the weakening rupiah, higher inflation and the possible end to the Federal Reserve's quantitative easing program, investors have been pulling money out of Indonesia.

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After market participants had time in the weekend to think over the 'rescue packages' of the Indonesian government and central bank (Bank Indonesia) that were released on Friday (23/08), they seemed unconvinced about the short-term impact of the packages. As a result, Indonesia's main stock index (IHSG) fell 1.18 percent to 4,120.67 points on Monday (26/08), which is the IHSG's lowest level since 7 September 2012. The Indonesian rupiah gained 0.06 percent to IDR 10,841 (Bank Indonesia's mid rate).

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Despite the announcement of an economic policy package aimed at overcoming the impact of global financial turmoil, Indonesia's main stock index (IHSG) was not able to end the week on a positive note, while the value of the rupiah on the spot market depreciated 1.68 percent to IDR 11,058 per US dollar on Friday (23/08) amid a majority of strengthening Asian currencies, including the Indian rupee (0.67 percent) and the Thai baht (0.28 percent). Based on Bank Indonesia's mid rate, the rupiah fell 4.4 percent against the US dollar to IDR 10,848 last week.

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Similar to the Indonesian government, Indonesia's central bank also announced a fiscal policy package to support sustainable nationwide economic growth by curbing inflation, maintaining a more sustainable balance of payments as well as strengthening financial system stability. These additional policies are expected to synergise with the policy package unveiled by the government on Friday (23/08). These measures were taken as both the rupiah and Indonesia's main stock index (IHSG) are in a downward spiral.

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The rebound that happened in the first session of Friday's trading day (23/08) gave hope that Indonesia's main stock index (IHSG) would end the disastrous week on a positive note. However, in the second session of the day market participants began selling Indonesian assets causing the index to fall again, although the fall was limited. In line with the Asian region, the index lost 0.04 percent to end at 4,169.83 points. Even the highly anticipated 'rescue package' of the Indonesian government was not able to support the index.

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Concerns about Indonesia's weakening rupiah intensified on Wednesday (21/08) as the currency is now balancing on the psychological boundary of IDR 11,000 per US dollar. The rupiah continued its downward spiral today although its decline was limited due to the intervention of Indonesia's central bank (Bank Indonesia) that started selling US dollars again in an effort to support the rupiah. According to data compiled by Reuters, the rupiah has now fallen 10.7 percent this year.

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On Tuesday (20/08), Indonesia's benchmark stock index (IHSG) continued its decline with its fourth consecutive day of losses. Amid major concerns about Indonesia's economic growth, high inflation, tighter monetary policy and current account deficit, the IHSG fell 3.21 percent to 4,174.98 points. It means that the index now stands about 21 percent lower than its record peak in May 2013. Foreign investors have been pulling money out of the Indonesian market. According to Bloomberg, about USD $255 million has been retracted in the last two days.

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After two days of growth, Indonesia's main stock index (IHSG) became victim of profit taking on Thursday (15/08). Particularly domestic investors were eager to sell their Indonesian assets. Falling indices on Wall Street on Wednesday (14/08) in combination with global uncertainty about the end of the Federal Reserve's quantitative easing program made a negative impact on Asian stock indices, including the IHSG. Indonesia's central bank's decision to keep its benchmark interest rate at 6.50% was well-received by most investors.

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