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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Contrary to expectations, the central bank of Indonesia (Bank Indonesia) left its monetary policy unchanged at the July policy meeting. The benchmark interest rate (BI rate) was kept at 6.50 percent, while the deposit facility rate and lending facility rate were kept at 4.50 percent and 7.00 percent, respectively. The 7-day reverse repurchase rate, which is set to become the central bank's new benchmark on 19 August 2016 - replacing the BI rate - was left at 5.25 percent.

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In the first three policy meetings of 2016, Indonesia's central bank (Bank Indonesia) cut its benchmark BI rate gradually yet aggressively from 7.50 percent to 6.75 percent as inflation, the rupiah rate and Indonesia's current account deficit were regarded as 'under control'. At the same time, Indonesia's lender of last resort acknowledged the BI rate has failed to influence borrowing costs and market liquidity effectively and therefore decided to adopt the seven-day reverse repurchase rate (reverse repo) as the nation's new benchmark starting from August 2016.

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The central bank of Indonesia (Bank Indonesia) revised down its projection for Indonesia's economic growth in 2016 to the range of 5.0 - 5.4 percent (y/y), slightly below its previous forecast in the range of 5.2 - 5.6 percent (y/y). Bank Indonesia Governor Agus Martowardojo said the central bank decided to trim its projection for gross domestic product (GDP) growth this year due to sluggish global economic growth, low commodity prices, and Indonesia's slightly disappointing Q1-2016 GDP growth figure at 4.92 percent (y/y).

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Indonesia's balance of payments registered a deficit in the first quarter of 2016. Based on the latest data from Indonesia's central bank (Bank Indonesia), the deficit stood at USD $287 million in Q1-2016, down from a USD $1.3 billion surplus in the same quarter last year. The balance of payments deficit was the result of the nation's Q1-2016 capital and financial transaction surpluses (USD $4.17 billion) not being able to cover the current account deficit (CAD). Indonesia's Q1-2016 CAD shrank to USD $4.67 billion, or 2.14 percent of the nation's gross domestic product (GDP).

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If we look back on the month of April, two important matters - related to the economy - occurred in Indonesia this month: (1) in the first week of April, the Indonesian government managed to complete the Revised 2016 State Budget (RAPBN-P 2016), and, one week later, (2) the central bank (Bank Indonesia) announced it will adopt a new benchmark monetary tool per 19 August 2016 - the so-called seven-day reverse repurchase rate - that is to replace the existing BI rate (which fails to influence market liquidity effectively).

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The central bank of Indonesia (Bank Indonesia) expects to see deflation in April 2016 on the back of controlled food prices as the harvest season has arrived. Bank Indonesia Governor Agus Martowardojo said a central bank survey shows deflation of 0.33 percent month-to-month (m/m) during the first three weeks of April. Besides lower food prices, Martowardojo also attributes April deflation to the government's decision to cut fuel prices (premium gasoline and diesel) by IDR 500 (approx. USD $0.04) per liter per 1 April. This move led to a 4 percent drop in public transportation tariffs.

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The central bank of Indonesia (Bank Indonesia) announced on Friday (15/04) it will adopt a new monetary tool per 19 August 2016 that is to replace the existing BI rate which is considered too inefficient to influence market liquidity as it is not directly tied to Indonesia's money markets. The seven-day reverse repurchase rate (reverse repo), which stood at 5.50 percent in the central bank's last auction, is to become the nation's new benchmark. Bank Indonesia Governor Agus Martowardojo, who communicated through a teleconference from Washington DC, emphasized that the central bank will not change its monetary stance.

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In line with expectation, the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (BI rate) by 25 basis points to 6.75 percent on Thursday (17/03) at its two-day policy meeting. It is the third straight month of monetary easing in Southeast Asia's largest economy. In the preceding two months the lender of last resort had also cut borrowing costs by 0.25 percent, each month. Furthermore, the deposit and lending facility rates were also cut by 25 basis points to 4.75 percent and 7.25 percent, respectively (effective per 18 March 2016).

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The central bank of Indonesia (Bank Indonesia) expects to see deflation at 0.15 percent month-to-month (m/m) in February 2016. Bank Indonesia Governor Agus Martowardojo said lower (government) administered prices in combination with low core inflation will be the recipe for deflation in the second month of the year. The lower administered prices that are primarily the cause of deflation consist of fuel prices, air fares and 12-kilogram liquefied petroleum gas (LPG) canisters. In the first month of the year Indonesian inflation accelerated to 4.14 percent (y/y).

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The central bank of Indonesia (Bank Indonesia) is expected to keep its benchmark interest rate (BI rate) relatively high in order to safeguard Indonesia's financial stability in 2016 (instead of seeking accelerated economic growth through a rate cut). Despite easing pressures on inflation and the country's current account balance, Bank Indonesia Governor Agus Martowardojo said that persistent global uncertainty (referring to the looming US Fed Fund Rate hike and China's slowdown) justifies the tight monetary stance.

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