The central bank of Indonesia (Bank Indonesia) expects Indonesia's headline inflation to ease in March 2017 as food prices are under control and can therefore offset the inflationary pressures that are caused by administered price adjustments (higher electricity tariffs). In February 2017 Indonesia's inflation rate accelerated to 3.81 percent (y/y) due to the ongoing impact of the higher electricity tariffs that were introduced by the government in January as well as a number of big floods that curtailed distribution channels across parts of Sumatra and Java.

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Indonesia's benchmark Jakarta Composite Index finished at an all-time record level on Friday (17/03), supported by mostly rising Asian stocks as global investors are attracted again by higher-yielding assets in emerging markets after the US Federal Reserve turned out to be not as "hawkish" as market participants had assumed. Indeed the Fed raised its key Fed Funds Rate by 25 basis points at the March policy meeting but the US central bank emphasized that further interest rate hikes would be gradual.

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The central bank of Indonesia (Bank Indonesia) is also among the many institutions or market participants that expect the Federal Reserve to raise its Fed Funds Rate by 25 basis points at the coming Federal Open Market Committee (FOMC) meeting (14-15 March 2017). This move should put some temporary pressure on the Indonesian rupiah (as Indonesia will most likely see capital outflows) and therefore Bank Indonesia sees few to none room for additional monetary easing in Southeast Asia's largest economy in the remainder of this year.

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Bank Indonesia, the central bank of Indonesia, announced that the nation's foreign exchange reserves had grown to USD 119.9 billion at end-February 2017, up from USD $116.9 billion in the preceding month (and the third straight month of growth). The increase was primarily attributed to foreign exchange receipts, which includes tax revenues and the government's oil & gas export proceeds. The rise was also possible on the back of the withdrawal of government foreign loans as well as the auction of Bank Indonesia foreign exchange bills (SBBI).

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Chances are big that the banking sector of Indonesia will see the non performing loan (NPL) ratio rise up to the range of 3.0 - 3.5 percent in 2017. Anton Gunawan, Chief Economist at state-controlled Bank Mandiri, says the rising NPL ratio is not so much caused by the lower quality of credit in Indonesia's banking system. The bigger problem is rising "special mention" loans, a loan grade that refers to assets that pose potential weaknesses that require close attention.

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The central bank of Indonesia cut its outlook for Indonesia's economic growth in the first quarter of 2017. Earlier, the lender of last resort estimated Indonesia's Q1-2017 gross domestic product (GDP) at 5.05 percent year-on-year (y/y). Although the new growth projection has not been unveiled yet, Bank Indonesia Governor Agus Martowardojo said it sees GDP growth now below 5.05 percent (y/y) in the first quarter of the year.

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The central bank of Indonesia (Bank Indonesia) expects Indonesia's current account deficit (CAD) to widen to 2.4 percent of the nation's gross domestic product (GDP), or about USD $23 billion, in 2017. Therefore, Bank Indonesia Governor Agus Martowardojo said the CAD remains one of the bigger challenges for Indonesia in the foreseeable future. In 2016 the nation's CAD had in fact eased to 1.8 percent of GDP (or USD $17 billion) on the back of a big improvement in the last quarter of 2016.

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The central bank of Indonesia (Bank Indonesia) expects the nation's current account deficit to widen to 2.4 percent of gross domestic product (GDP) in 2017 due to expectation of rising imports in Indonesia this year. These rising imports come on the back of growing investment realization in Southeast Asia's largest economy. This projection is significantly higher compared to the estimated USD $17 billion, or 1.8 percent of GDP, current account deficit in 2016.

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The central bank of Indonesia (Bank Indonesia) announced that the nation's foreign exchange reserves climbed to USD $116.4 billion at the end of December 2016, up from USD $111.5 billion one month earlier. Growth was attributed to foreign exchange receipts, primarily stemming from the issuance of government global bonds debt securities, the withdrawal of government foreign loans, tax revenues and oil & gas export proceeds, that all surpassed the use of foreign exchange for government external debt repayments and Bank Indonesia's maturing foreign exchange bills.

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The central bank of Indonesia (Bank Indonesia) expects inflation to reach the range of 0.50-0.60 percent month-on-month (m/m) in December 2016 as Christmas and New Year celebrations, traditionally, give rise to higher consumer spending. The projection would also imply that full-year inflation will fall well within Bank Indonesia's target range of 3.0 - 5.0 percent (y/y) in 2016 (year-to-date, Indonesian inflation has accumulated to 2.59 percent), the second straight year of mild inflation (for Indonesian standards).

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For the first time in four years Bank Indonesia opted for monetary tightening by raising the benchmark interest rate (the 7-Day Reverse Repo Rate) by 25 basis points (bps) to 4.50 percent. Also the deposit facility and lending facility rates were raised by 25 bps to 3.75 percent and 5.25 percent, respectively (effective per 18 May 2018). This latest move is part of Bank Indonesia's efforts to maintain economic stability amid the high degree of uncertainty in global financial markets.

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In an ad hoc press conference on Thursday (26/04) Bank Indonesia Governor Agus Martowardojo provided an update on the performance of the Indonesian rupiah as well as an update on the strategies that are - or can be - used by the central bank to safeguard a stable rupiah. When the ad hoc press conference was announced we initially expected to see an interest rate hike. However, based on a statement from Bank Indonesia, this seems to be the last option the central bank wants to use.

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Indonesia's benchmark Jakarta Composite Index fell 1.24 percent to 6,229.63 points on Tuesday (24/04). The performance of Indonesian stocks were in line with the general trend in Southeast Asia. Due to rising US treasury yields (touching nearly 3 percent, its highest level since January 2014) investors withdraw their funds from riskier assets in emerging markets. Concerns over US inflation and the fiscal deficit are behind the rising US treasury yield.

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Bank Indonesia, the central bank of Indonesia, decided to leave interest rates unchanged at the April policy meeting (18-19 April 2018). The benchmark interest rate (the 7-day Reverse Repo Rate) was kept at 4.25 percent for the seventh straight month. Meanwhile, the deposit facility and lending facility rates were maintained at 3.50 percent and 5.00 percent, respectively. Dody Budi Waluyo, who was inaugurated as Deputy Governor on Wednesday (18/04), said an interest rate hike would be counterproductive to the nation's economic growth.

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Chances are big that Perry Warjiyo will become the next governor of Indonesia's central bank (Bank Indonesia). On Wednesday (28/03) Warjiyo, the sole nominee of Indonesian President Joko Widodo to replace incumbent Bank Indonesia Governor Agus Martowardojo after the latter's term ends in May 2018, appeared before the House of Representatives' (DPR) financial commission for a "fit and proper" test.

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The central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate - the BI 7-day Reverse Repo Rate - at 4.25 percent at the February Board of Governor's Meeting (14-15 February 2018). Meanwhile, it maintained the deposit facility and lending facility rates at 3.50 percent and 5.00 percent, respectively (effective per 19 February 2018).

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The central bank of Indonesia (Bank Indonesia) said it needs about two years to complete a study about the possibility of issuing a digital rupiah currency (Central Bank Digital Currency, or CBDC). Agus Martowardoyo, Governor of Bank Indonesia, said the lender of last resort has just started to study the possibility of using a digital rupiah for domestic payments.

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The central bank of Indonesia, Bank Indonesia, left its interest rate regime unchanged - for the fourth straight month - at the January 2018 policy meeting. The benchmark BI 7-day Reverse Repo Rate was kept at 4.25 percent, while the deposit facility and lending facility rates were held at 3.50 percent and 5.00 percent, respectively (effective per 19 January 2018). These decisions were in line with analyst forecasts.

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Although the Indonesian rupiah has been strengthening against the US dollar since mid-December 2017, the rupiah may encounter serious pressures in the year 2018 amid US tax reforms, the US Federal Reserve's further monetary tightening, and unstable geopolitics. Meanwhile, Indonesian exports are expected to grow, but only in the range of 5-6 percent year-on-year (unlike 2017 when the nation's exports rebounded 17 percent).

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At the monthly policy meeting on 13-14 December 2017, Bank Indonesia decided to hold the benchmark BI 7-day Reverse Repo Rate at 4.25 percent, while it maintained the deposit facility and lending facility rates at 3.50 percent and 5.00 percent, respectively, effective per 15 December 2017.

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