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In March 2022 the US Federal Reserve started to tighten its monetary policy in an aggressive manner to combat high US inflation that –at one point– touched a 40-year high.
Before we give an update on the monetary policy of Indonesia’s central bank (Bank Indonesia), it is worth mentioning that Bank Indonesia Governor Perry Warjiyo was appointed for another five-year term (2023-2028) as the central bank’s chief.
The central bank of Indonesia (Bank Indonesia) raised its benchmark interest rate (BI 7-day reverse repo rate) by 25 basis points (bps) after concluding its two-day policy meeting on 18-19 January 2023. Indonesia’s benchmark rate now stands at 5.75 percent. It also raised its deposit facility and lending facility rates by 25 bps to 5.00 percent and 6.50 percent, respectively.
Last month we stated that Indonesia’s central bank (Bank Indonesia) might just be at the start of a (prolonged) monetary tightening cycle. After all, higher interest rates is what we see happening across the world; a development that is led by the Federal Reserve (Fed) that has been aggressively raising its benchmark interest rate to fight inflation. This then causes capital outflows from most other parts of the world.
As Indonesia’s central bank (Bank Indonesia) was very late in terms of tightening its monetary policy amid the latest global tightening cycle – and the US Federal Reserve continued its hawkish stance with another 0.75 percentage point hike in September 2022 – it has some catching up to do.
At its latest monetary policy meeting, held on 18-19 April 2022, Bank Indonesia decided to leave its interest rates unchanged in an effort to facilitate the ongoing economic rebound. The benchmark interest rate (the BI 7-day reverse repo rate) was maintained at 3.50 percent, while the deposit facility and lending facility rates were kept at 2.75 percent and 4.25 percent, respectively.
A bit later than usual due to the week-long Idul Fitri holiday, our April 2022 report was released on Monday 9 May 2022. In this report Indonesia Investments discusses key economic, political and social developments that occurred in Indonesia in the month of April 2022.
At its latest monetary policy meeting, completed on 18 February 2021, Indonesia’s central bank (Bank Indonesia) decided to cut its benchmark interest rate (the seven-day reverse repurchase rate) by 25 basis points (bps) to 3.50 percent, a historically low level for Southeast Asia’s largest economy. Also the deposit facility and lending facility rates were cut by 25 bps to 2.75 percent and 4.25 percent, respectively.
For the second consecutive month the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (the BI seven-day reverse repo rate). And, again, the rate was cut by 25 basis points (bps). It means that the key rate is now at the level of 4.50 percent.
The central bank of Indonesia (Bank Indonesia) left its benchmark interest rate untouched for the first time in five months. At the two-day policy meeting, which was concluded on Thursday (21 November 2019), Bank Indonesia kept the BI 7-Day Reverse Repo Rate at 5.00 percent, while maintaining the deposit facility and lending facility rates at 4.25 percent and 5.75 percent, respectively.
Latest Columns Bank Indonesia
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.
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.
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.
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.
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.
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).
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.
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.
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).
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.
