Motorcycle sales in Indonesia rose 20 percent (year-on-year) to 661,282 units in June 2013. The head of the commercial department of the Indonesian Motorcycle Industry Association (AISI), Sigit Kumala, said that sales peak in June and July because of the Lebaran tradition that follows the holy fasting month (which starts tomorrow). After this fasting month, many Indonesians go back to their places of birth for a couple of days. Motorcycles are one of the modes of transportation used for this short holiday.

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Indonesia's inflation rate is expected to exceed one percent in June 2013 as a result of the increase in price of subsidized fuel that was implemented last week. Throughout Indonesian society, prices have been revised upward to cover for the increased fuel costs. These first round effects may still be felt in July, when inflation is expected to peak at two percent as the fasting month (Ramadhan) and the new school season will start. Second round effects may continue for another five months.

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Both Industry minister M.S. Hidayat and Economic minister Hatta Rajasa confirmed that on Friday (21/06) the government will announce the increase in price of subsidized fuel after it had already been approved by the House of Representatives (DPR) last Monday (17/06). Immediately after the announcement, the price of fuel is set to be raised. It has been reported that the government's announcement will be revealed at midnight, implying that the price hike is effective starting from Saturday.

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The central bank of Indonesia (Bank Indonesia) decided today to raise its benchmark interest rate by 25 basis points to 6.0 percent. The decision was made amid concerns about the inflationary impact of a hike in subsidized fuel prices (planned this June) as well as increasing uncertainty in global financial markets as central banks' may scale back stimulus programs. The Indonesian rupiah has weakened considerably in 2013 and forms the worst performer in Asia after the Japanese yen among the 11 most-traded currencies tracked by Bloomberg.

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To ease pressures on the IDR rupiah, Indonesia's central bank has used about USD $2.0 billion of its foreign exchange reserves to support the currency as the country's continuing trade deficit as well as concerns about the possible increase in price of subsidized fuel in June has caused much uncertainty about the level of inflation in the near future and puts downward pressure on the rupiah. Indonesia's foreign exchange reserves fell to USD $105.2 billion in late May 2013 from USD $107.3 billion at the end of April.

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Indonesia's central bank (Bank Indonesia) has approved Singapore's DBS Group to buy a maximum stake of 40 percent in Indonesia's Bank Danamon Indonesia, the sixth largest bank of Indonesia in terms of asset size. Last year, the DBS Group wanted to purchase a 67.73 percent stake, owned by Asia Financial Indonesia, in the bank but the purchase was delayed as Indonesian regulators wanted to limit foreign ownership in the country's financial sector due to fears of foreign domination.

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Today, former head of the Indonesia Investment Coordinating Board (BKPM), Chatib Basri, will be installed as Indonesia's Finance minister after former Finance minister Agus Martowardojo resigned to become Governor at Indonesia's central bank (Bank Indonesia) for the period 2013 to 2018. Basri, who underwent a fit-and-proper test at the State Palace yesterday, has limited time to exercise his influence as a policy maker as President Yudhoyono's United Indonesia Cabinet II will end its term in mid-2014.

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The central bank of Indonesia (Bank Indonesia, or BI) kept its benchmark interest rate at 5.75 percent and its overnight deposit facility rate (FASBI) at four percent as the country's core inflation figure is still within the target range of the central bank (3.5-5.5 percent). Core inflation currently stands at 4.12 percent (YoY). However, as the price of subsidized fuel is expected to rise in June, inflation may increase and could trigger a policy response by Bank Indonesia later this year.

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Analysts expect that Indonesia's central bank (Bank Indonesia) will maintain its benchmark interest rate at 5.75 percent in tomorrow's meeting (14/05/13). This rate, a historic low rate for Indonesia, has been in force since February 2012. The central bank's deposit facility (Fasbi) is also expected to be kept at 4 percent. The position of Governor of Bank Indonesia - currently held by Darmin Nasution - will be taken over at the end of this month by Agus Martowardojo.

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In April 2013, Indonesia's inflation rate eased 0.10 percent month-on-month, or 5.57 percent year-on-year. According to Statistics Indonesia (Badan Pusat Statistik, abbreviated BPS) April's deflation was triggered by easing food and clothes prices. Food items that became cheaper last month included garlic, chili, and chicken meat. Particularly rice contributed to the country's deflation as the harvesting season in Indonesia has set in. Core inflation is 4.12 percent (YoY).

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At its latest monetary policy meeting, which ended on 18 February 2021, the central bank of Indonesia (Bank Indonesia) decided to cut its benchmark interest rate (BI 7-Day Reverse Repo Rate), again, by 25 basis points (bps) to 3.50 percent, touching a historically low level.

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It came as a big surprise to us when the central bank of Indonesia (Bank Indonesia) announced on 19 November 2020 (the day it concluded its two-day monetary policy meeting) that it decided to cut its benchmark interest rate (the seven-day reverse repo rate) by 25 basis points to 3.75 percent. Bank Indonesia also cut its deposit facility and lending facility rates by 25 basis points to 3.00 percent and 4.50 percent, respectively.

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In September 2020 concern arose over whether the House of Representatives (DPR) is trying to undermine the country’s central bank (Bank Indonesia)’s independence (from the government). The DPR’s legislation body came with a bill (a draft revision of the Bank Indonesia Law) that contains a number of controversial articles, making analysts concerned about the quality of future monetary policymaking in Indonesia.

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In February 2020 all eyes were on the novel coronavirus outbreak and its impact on the global financial markets. Especially when the new virus spread across European countries toward the end of the month, market participants started selling their assets, causing huge sell-offs around the globe.

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The central bank of Indonesia (Bank Indonesia) decided to cut its benchmark interest rate ("BI seven-day reverse repo rate") by 25 basis points (bps) to 4.75 percent at the two-day policy meeting on 19 and 20 February 2020.

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In line with expectations, the central bank of Indonesia (Bank Indonesia) kept its benchmark BI 7-Day Reverse Repo Rate at 6.00 percent at the February policy meeting that was held on 20-21 February 2019. Also the deposit facility and lending facility rates were kept at 5.25 percent and 6.75 percent, respectively.

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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.

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Concerns about Indonesia's current account balance increased after Bank Indonesia announced last week that the country's current account deficit widened to USD $8.02 billion, or 3.0 percent of gross domestic product (GDP), in the second quarter of 2018. It is Indonesia's highest quarterly deficit since Q3-2014, thus putting additional pressures on the rupiah exchange rate.

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Bank Indonesia decided to hold the BI 7-day Reverse Repo Rate at 5.25 percent during the July 2018 monthly policy meeting. It also maintained the deposit facility and lending facility rates at 4.50 percent and 6.00 percent, respectively. Bank Indonesia believes the rates are consistent with its efforts to maintain domestic financial market attractiveness against a backdrop of pervasive uncertainty on global financial markets.

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This week two domestic events need to be carefully watched by those who invest in Indonesian assets: (1) the local elections that are scheduled for Wednesday 27 June, and (2) Bank Indonesia's monthly policy meeting that is scheduled for 27-18 June. Lets take a closer look at these events.

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