As was widely expected by markets, the Federal Reserve raised its key interest rate to the range of 1.50 - 1.75 percent, which is the highest level since 2008, at the March 2018 monthly policy meeting on Wednesday (21/03). The rate hike was already priced in as few expected a different decision, hence most Southeast Asian stock indexes are up on Thursday (22/03), including Indonesia's benchmark Jakarta Composite Index that rose 0.19 percent to 6,324.78 points in the first trading session.

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Although the fundamentals of the Indonesian economy are sound, credit rating agency Standard & Poor's Global Ratings (S&P) warned that there are several threats. These threats include four Fed Funds Rate hikes in 2018, a fragile rupiah, a looming higher benchmark interest rate in Indonesia (BI 7-day Reverse Repo), sluggish household consumption growth, a shift of focus from reforms to elections, the impact of a global trade war, and a deterioration in the balance sheets of certain state-owned enterprises (SOEs).

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Rapidly rising US stock futures and a sell-off in the bond market. These are the results of an impressive US jobs report, released by the US Labor Department on Friday morning (American time) or evening (Indonesian time). The US economy added 313,000 jobs in February 2018, the highest increase since October 2015. A huge rise in construction jobs was one of the key supporting factors. Meanwhile, the US unemployment rate stayed at 4.1 percent for a 5th straight month.

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Based on the Bloomberg Dollar Index the value of the Indonesian rupiah weakened 0.41 percent to IDR 13,816 per US dollar on Thursday (08/03), the currency's weakest position since January 2016, ahead of the release of US non-farm payrolls and US employment data due on Friday (09/03). These data are expected to be strong and therefore pave the way for another Fed Funds Rate hike in March 2018.

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Indonesia's foreign exchange reserves fell from a record high of USD $131.98 billion at the end of January 2018 to USD $128.06 billion at the end of February 2018. In a statement released on its official website, the central bank of Indonesia (Bank Indonesia) attributed the decline in reserve assets is to the use of foreign exchange to repay government external debt as well as efforts to stabilize the Indonesian rupiah exchange rate.

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Based on the Bloomberg Dollar Index the Indonesian rupiah depreciated 0.53 percent to IDR 13,751 per US dollar on Wednesday (28/02), the weakest level against the greenback in slightly over two years. The weakening of the rupiah is in line with the performance of most other currencies as the US dollar is at a three-week high after Federal Reserve Chairman Jerome Powell struck a hawkish tone in his first congressional testimony.

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The central bank of Indonesia (Bank Indonesia) is expected to leave its interest rates regime unchanged at the monthly policy meeting in February (14-15 February 2018) amid (expectations of) tighter monetary policies in the United States (USA), European Union (EU) and Japan.

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Over the past two weeks the Indonesian rupiah depreciated significantly, passing beyond the IDR 13,600 per US dollar level. Also on Monday (12/02) rupiah weakening continued albeit very limited. By 15:25 pm local Jakarta time the currency of Indonesia had weakened 0.05 percent to IDR 13,635 per US dollar (Bloomberg Dollar Index).

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Overnight, the Dow Jones Industrial Average experienced another correction, in fact: a brutal sell-off. After Monday's heavy losses, the Dow Jones plunged 4.15 percent to 23,860 points on Thursday (08/02). Besides the Dow Jones, the S&P 500 has also entered "correction territory" (having fallen over ten percent since their January highs). The mini correction that we saw on Tuesday may have been the eye in the storm only.

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The benchmark Jakarta Composite Index of Indonesia - Jakarta Composite Index - rebounded 0.46 percent to 6,605.63 points on Wednesday (31/01) after the heavy 1.57 percent drop on the preceding day when Asian stock markets were dragged down by Wall Street and rising global bond yields.

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The central bank of Indonesia (Bank Indonesia) decided to leave its monetary policy unchanged at the two-day policy meeting in June 2017 that was concluded on Thursday (15/06). As widely expected it kept the benchmark 7-day reverse repurchase rate at 4.75 percent, as well as the deposit facility and lending facility at 4.00 percent and 5.50 percent, respectively. These existing levels are regarded to keep financial markets and the economy stable.

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The central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (seven-day reverse repo rate) at 4.75 percent at the April policy meeting (19-20 April 2017), while its deposit facility rate and lending facility rate stayed at 4.00 percent and 5.50 percent, respectively. Bank Indonesia considers the current interest rate environment appropriate to face global uncertainties as well as rising inflationary pressures at home.

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Bank Indonesia, the central bank of Indonesia, is expected to maintain its benchmark interest rate (the seven-day reverse repurchase rate, or reverse repo) at 4.75 percent in the remainder of 2017. Priasto Aji, economist at the Asian Development Bank (ADB), says Bank Indonesia may not need to adjust its key interest rate at all this year even though there is looming further monetary tightening in the USA.

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The central bank of Indonesia (Bank Indonesia) left its interest rate policy unchanged at the March 2017 policy meeting. This decision was in line with expectations especially after Bank Indonesia officials had stated that they see few room for monetary easing in the foreseeable future considering the US Federal Reserve is likely to raise its key rate several times this year (which could encourage capital outflows from Indonesia), while inflationary pressures in Indonesia are rising.

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The central bank of Indonesia (Bank Indonesia) decided to leave its interest rate environment unchanged at the January 2017 policy meeting on Thursday (19/01). The benchmark seven-day reverse repurchase rate (BI 7-day RR Rate) was kept at 4.75 percent, while the Deposit Facility and Lending Facility rates were maintained at 4.00 percent and 5.50 percent, respectively. The decisions of Bank Indonesia are in line with analysts' forecasts. Due to risks of capital outflows Indonesia's central bank had few room to ease monetary policy.

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The government of Indonesia suspended all cooperation with US multinational banking and financial services firm JP Morgan Chase after the US bank double downgraded Indonesia from overweight to underweight without elaborating too much on the exact motives behind this drastic move. According to Indonesian government officials this downgrade is excessive and lacks evidentiary support or rational justification. Moreover, they argue this "misleading" downgrade has a big psychological impact on investors and therefore it "disturbs Indonesia's financial stability".

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American multinational finance company Goldman Sachs Group Inc believes Indonesia currently has strong enough economic fundamentals to cope with monetary tightening in the USA. Indonesia is in a better position now compared to 2013 when the taper tantrum (the winding down of the US Federal Reserve's quantitative easing program) led to massive capital outflows from emerging markets (and Indonesia was among the biggest victims with the rupiah weakening more than 25 percent against the US dollar in 2013).

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Stock markets in Asia are mixed, yet tepid on Friday (16/12) after the US Federal Reserve raised its interest rate regime for the second time in a decade on Wednesday (14/12). Although the Fed's move was widely anticipated (and therefore already "priced in" to a high degree) it still resulted in some capital outflows from Asia's stock markets on Thursday (13/12). Japan, as usual, is the notable exception as US dollar strength (or yen weakness) makes Japan's export-oriented stocks more attractive.

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The Bank of Indonesia recently resorted to a sudden cut in interest rate (by 25 bps to 4.75 percent) at its 20th October 2016 meeting. This followed a 25 bps reduction in September and thus this is the sixth time this year that the Indonesian central bank has elected to loosen monetary policy.

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The central bank of Indonesia (Bank Indonesia) cut its benchmark BI 7-day Reverse Repo rate (RR rate) by 25 basis points to 5 percent at the policy meeting that was concluded on Thursday (22/09). The lender of last resort also cut the Deposit and Lending Facility rates¹ by 25 basis points to 4.25 percent and 5.75 percent, respectively. Given the stable domestic economy, Bank Indonesia is able to allow a loser monetary policy hence providing more room for accelerated economic growth amid a still uncertain global economic context.

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