On Tuesday (01/04), Statistics Indonesia announced that Indonesia's March 2014 inflation rate was recorded at 0.08 percent, considerably lower than February 2014 inflation (0.26 percent) and March inflation in 2013 (0.63 percent). Factors that contributed to lower than expected March inflation were a decline in prices of food commodities due to the start of the harvest season, and the appreciating rupiah, which neutralized imported inflation. On a year-on-year basis, Indonesian inflation eased to 7.32 percent from 7.75 percent in February 2014.

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Singapore-based DBS Bank predicts that household consumption in Indonesia will grow 5.6 percent (yoy) in the first semester of 2014, which is slightly higher than the growth recorded in the last three years. Gundy Cahyadi, economist at the DBS Bank, said that the main reason for this accelerated household consumption is the legislative election that will be held on 9 April 2014. Traditionally, consumption peaks in times of elections. Household consumption is one of the main pillars of Indonesia's economic growth, accounting for 55 percent of GDP.

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Indonesia's Finance Minister Chatib Basri is optimistic that Indonesia's economic growth can reach 5.8 to 6.0 percent in 2014. According to Basri, three factors support this expectation: strong household consumption, an improving global economy, and the impact of Indonesia's legislative and presidential elections (scheduled for April and July 2014). However, one of the biggest challenges for the Indonesian government will be to offset the impact of further US Federal Reserve tapering and US interest rate hikes in 2015 and 2016.

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The Indonesian rupiah exchange rate and benchmark stock index (IHSG or Jakarta Composite Index) both plunged severely after the US Federal Reserve announced on Wednesday (19/03) to cut another USD $10 billion from its bond-buying program (quantitative easing). Moreover, speculation arose that US interest rates may increase in 2015 (the US central bank had kept interest rates close to zero for over five years to stimulate economic growth). It led to tumbling stocks, bonds and currencies across Asia on Thursday (20/03).

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Ticket sales of domestic low-cost carriers in Indonesia have declined up to 20 percent after the Transportation Ministry implemented new (higher) surcharge fees for airline tickets on 26 February 2014. The new fuel surcharge was needed to offset the negative influence of sharp rupiah depreciation in 2013, which led to rising jet fuel prices, as well as low passenger rates amid the current low season. The Indonesia National Air Carrier Association (INACA) had previously requested for the new surcharge as Indonesia's aviation industry was in jeopardy.

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The central bank of Indonesia (Bank Indonesia) lowered its forecast for growth of Southeast Asia's largest economy in 2014 from the range of 5.8 - 6.2 percent to 5.5 - 5.9 percent as expansion of domestic consumption and exports are less robust than previously estimated. As such, Bank Indonesia implied that economic expansion of Indonesia will slow down further. Starting from 2011, gross domestic product (GDP) growth of Indonesia has declined steadily from 6.5 percent to 5.8 percent in 2013.

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It was decided at the Board of Governors' Meeting (on 13 March 2014) to hold the benchmark interest rate (BI rate) at 7.50 percent, the lending facility rate at 7.50 percent and the deposit facility rate at 5.75 percent. The policy is consistent with ongoing efforts to guide inflation back towards its target corridor of 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level. Recent developments indicate that the rate of inflation is under control and the current account deficit is shrinking.

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Tomorrow (13/03), Bank Indonesia will hold its next Board of Governor's Meeting to discuss general policies in the monetary field. As usual, market participants are highly interested in the central bank's assessment of the country's economic fundamentals and interest rates policy. However, predictions about Bank Indonesia's stance toward its benchmark interest rate (BI rate) are mixed. Some expect it to be kept at 7.50 percent as inflation has been under control. Others anticipate a 0.25 percent hike due to the country's weak exports.

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On 9 March 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as an analysis of February 2014 inflation and the January 2014 trade deficit, the rupiah exchange rate, HSBC manufacturing PMI, Indonesia's new economic policy package, and more.

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Amid a political crisis in the Ukraine, the oil price has risen significantly and the US dollar is appreciating against other currencies, particularly emerging market currencies, including the Indonesian rupiah exchange rate. Besides the US dollar, demand for other safe havens (gold, yen as well as US Treasuries) also increased due to Russian presence in the Ukraine (Crimea peninsula). Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.35 percent to IDR 11,632 per US Dollar at 11:40 a.m. local Jakarta time.

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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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Indonesian President Joko Widodo said market participants should reduce their focus on the US dollar as benchmark for Indonesia's rupiah currency. Instead of the US dollar, it is better to use China's renminbi, the European Union's euro, or Japan's yen as a benchmark for the rupiah as these rates better reflect the fundamentals of Southeast Asia's largest economy. The rupiah has come under pressure against the US dollar after Donald Trump's victory in the 2016 US presidential election.

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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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Indonesia's benchmark Jakarta Composite Index experienced another tough day on Monday (14/11). After Indonesian stocks plunged 4.01 percent on Friday, stocks fell another 2.2 percent today. Not only Indonesia, but most Asian markets are hit by the selloff, particularly the emerging markets of Southeast Asia. Investors are re-evaluating their emerging market assets now Donald Trump has been elected the next US president (and who can rely on a Republican-controlled US Congress). To make matters worse, current uncertainty is expected to persist in the next couple of months.

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Bank Indonesia (BI) is the central bank of the Republic of Indonesia, and was known as "De Javasche bank" or "The Java Bank" in the colonial period.  Bank Indonesia was founded on 1 July 1953 from the nationalization of De Javasche Bank. As an independent state institution, Bank Indonesia is fully autonomous in formulating and implementing each of its assumed tasks and most policy goals tend to center around the ability to stabilize prices in the economy.

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Asian stocks, including Indonesia's benchmark Jakarta Composite Index, continue their persistent slide on Friday (04/11) ahead of the US presidential election on Tuesday 8 November 2016. By 10:45 am local Jakarta time, Indonesian stocks were down 0.29 percent to 5,314.00 points, while the rupiah had depreciated 0.14 percent to IDR 13,093 per US dollar (Bloomberg Dollar Index). Besides the too-close-to-call US election, investors are also keeping an eye on the mass demonstration in Jakarta today.

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The central bank of Indonesia (Bank Indonesia) has become slightly less optimistic about Indonesia's economic growth in the third quarter of 2016. Bank Indonesia revised down its growth projection to below the 5 percent (y/y) mark for Q3-2016 (from an earlier forecast of 5.2 percent). However, the lender of last resort still expects to see a better performance compared to the 4.73 percent (y/y) pace posted in Q3-2015. Meanwhile, low inflation and a strong rupiah could result in another interest rate cut in Southeast Asia's largest economy.

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Packaged food producer Indofood CBP Sukses Makmur, subsidiary of Indofood Sukses Makmur, is expected to see rising profit in the second half of 2016 on the back of lower prices of raw materials (particularly wheat flour, the key ingredient for instant noodles), the stronger rupiah and improved purchasing power of Indonesia's consumer force. Meanwhile, the company may manage to curb losses that originate from the beverage segment. Indofood CBP Sukses Makmur has 6 business segments: noodles, dairy, snack foods, food seasoning, nutrition and special food products, and beverages.

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The central bank of Indonesia (Bank Indonesia) has made some important decisions under the current Governor Agus Martowardojo. Here, Bank Indonesia has been directed toward achieving the responsibility of making financial decisions that promote consumer price stability over the long-term. This has resulted in widespread gains in the rupiah against a basket of world currencies -- including the US dollar. But recent rate cuts now have the potential to reverse these broader trends.

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Many things happened this week. A devastating terror attack in Nice (France) killed at least 84 people, while - at the time of writing - a coup attempt occurred in Turkey (that seems to have failed). However, these events have little impact on the performance of global stocks and currencies (with the obvious exception of the Turkish lira). Wall Street touched record highs, while Indonesian stocks rose to a 13-month high and the Indonesian rupiah strengthened to a four-month high. Lets take a closer look at the performance of these markets over the past week.

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