Although global media focus on the vicious terrorist attacks that occurred today in Jakarta, the country's central bank (Bank Indonesia) made a surprise move by cutting its key interest rate (BI rate) by 25 basis points to 7.50 percent at the January policy meeting. It is a surprise as Bank Indonesia emphasized repeatedly that it is primarily focused on rupiah stability while - amid severe market volatility (due to economic turmoil in China) - the rupiah remains under pressure.

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On Wednesday (13/01) Indonesia's central bank is set to start its monthly policy meeting. A novelty this year is that the monthly policy meetings of Bank Indonesia will take two days instead of one. Another interesting novelty is that Bank Indonesia invited Indonesia's Chief Economics Minister Darmin Nasution to attend the central bank's first policy meeting of 2016. Analyst opinions about whether Bank Indonesia has room to cut its relatively tight monetary policy are mixed.

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The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves have risen considerably in December 2015. At the end of the last month of 2015 the foreign exchange assets stood at USD $105.9 billion, up from USD $100.2 billion in the preceding month. This is a remarkable result as the global and domestic economy is still plagued by uncertainty and volatile capital flows (in December the Federal Reserve finally raised its key Fed Fund Rate by 25 basis points).

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Good news at the start of the new year. Indonesia's consumer confidence has risen in December 2015 according to the latest Bank Indonesia survey. Consumer optimism means that consumers are more likely to purchase goods hence giving ammunition for accelerated economic growth (domestic consumption accounts for about 55 percent of the nation's total economic growth). The portion of income that respondents use for consumption rose 0.6 percent month-on-month (m/m) to 69 percent of their income.

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The Indonesian rupiah continued its remarkable rally on Tuesday (22/12). The currency had appreciated 0.98 percent to IDR 13,672 per US dollar by 11:10 am local Jakarta time (Bloomberg Dollar Index). The rupiah has recovered from a recent low of IDR 14,123 on Monday 14 December to IDR 13,672 per US dollar, a 3.2 percentage point advance in about one week. There are several matters that explain this remarkable performance.

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Bank Indonesia, the central bank of Indonesia, expects banks' credit growth realization to reach 9-10 percent (y/y) in 2015, below its target of 11-13 percent (y/y). Up to October 2015 Indonesian banks' credit growth stood at 10.4 percent, slowing from 11.1 percent in the preceding month. Juda Agung, Executive Director of Economic and Monetary Policy Department Bank Indonesia, said slowing credit growth is in line with the economic slowdown.

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Bank Indonesia, the central bank of Southeast Asia's largest economy, kept its key interest rate (BI rate) at 7.50 percent at the December policy meeting on Thursday (17/12). Meanwhile, the overnight deposit rate facility (Fasbi) was left unchanged at 5.50 percent and the lending facility at 8.00 percent. It was the tenth consecutive month without changing the country's interest rate environment (in February 2015 the central bank cut the BI rate by 0.25 percent).

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The foreign exchange reserves of Indonesia fell slightly in November. According to the latest data from Indonesia's central bank (Bank Indonesia) the reserves stood at USD $100.24 billion at end-November, down from USD $100.7 billion at the end of the preceding month. The reserves fell on foreign exchange receipts, public foreign debt payments and the central bank's efforts to stabilize the rupiah exchange rate.

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The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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The latest consumer survey of Indonesia's central bank (Bank Indonesia) indicates that consumer confidence in Indonesia has improved - turning pessimism into optimism - in November on expectations of better economic conditions. Bank Indonesia's consumer confidence index, which is based on 1,700 household respondents in six major cities in Indonesia, rose to 103.7 points in November from 99.3 points in the preceding month. A reading below 100.0 signals that consumers are pessimistic.

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As Indonesia's inflation rate has eased to 6.25 percent (y/y) in October 2015 from 6.83 percent (y/y) in the previous month, and given that Indonesian inflation will ease more markedly in the last two months of 2015 as the impact of the subsidized fuel price hike in November 2014 will vanish, the central bank of Indonesia (Bank Indonesia) seems to have more scope to cut its current relatively high benchmark interest rate, hence giving rise to accelerated economic activity.

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The central bank of Indonesia announced on Thursday (17/09) that it the country’s key interest rate (BI rate) at 7.50 percent, while maintaining the deposit facility rate at 5.50 percent and the lending facility rate at 8.00 percent. According to Bank Indonesia (BI) this decision is consistent with its efforts to push inflation towards the target corridor of 4±1 percent in both 2015 and 2016. In addition, the decision is also part of Bank Indonesia’s measures to anticipate possibilities of a Fed Fund Rate (FFR) hike.

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Although Indonesian stocks managed to rebound, the rupiah continued to depreciate against the US dollar today (25/08). However, rupiah weakening was limited as Bank Indonesia was closely monitoring and intervening in markets to support the rupiah. Based on the Bloomberg Dollar Index, the Indonesian rupiah depreciated 0.03 percent to IDR 14,054 per US dollar. As significant further rupiah weakening is assumed to seriously undermine confidence in the rupiah, the central bank’s intervention efforts are well received by investors.

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During Bank Indonesia’s Board of Governors it was decided on 18th August 2015 to hold the BI Rate at 7.50 percent, while maintaining the Deposit Facility rate at 5.50 percent and the Lending Facility rate at 8.00 percent. The decision is consonant with efforts to control inflation within the target corridor of 4±1 percent in 2015 and 2016. In the short term, Bank Indonesia (BI) is focused on efforts to stabilize the rupiah amid uncertainty in the global economy, by optimizing monetary operations in the rupiah and the foreign exchange market.

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In a bid to boost economic activity in Indonesia, the central bank (Bank Indonesia) revised several regulations involving down payments for the purchase of cars and motorcycles as well as the maximum loan-to-value (LTV) ratios for first or more home purchases by Indonesian citizens. Yati Kurniati, Director of Bank Indonesia’s Macroprudential Department, said that the central bank implemented the looser monetary policy in the property and automotive sectors in an effort to boost credit growth, hence boosting the whole economy.

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Soon it will be made easier to buy property in Indonesia as the country’s central bank (Bank Indonesia) plans to ease down payment (DP) requirements for mortgages. Today (22/05), Bank Indonesia Governor Agus Martowardojo told reporters that the DP obligation for first-home buyers will be lowered from 30 percent to 20 percent of the property’s value. This relaxation should have a positive effect on the performance of Indonesia’s financial institutions and property developers as demand for loans and property is assumed to grow.

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Investors are clearly waiting for results of Bank Indonesia’s Board of Governor’s Meeting, conducted today (19/05). In this monthly policy meeting, Indonesia’s central bank will decide on its monetary approach. For most market participants it is of crucial importance to learn whether Bank Indonesia will adjust its interest rate policy in order to support the country’s economic growth (which slowed to a five-year low in the first quarter of 2015). Ahead of results, scheduled to be released this afternoon, Indonesian stocks and the rupiah weaken.

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Bank Indonesia announced today that the country’s total foreign debt rose 7.6 percent (y/y) to USD $298.1 billion in the first quarter of 2015. This figure means that the pace of the country’s foreign debt growth has slowed from the 10.2 percentage point growth (y/y) that was recorded in the preceding quarter. Both public and private sector foreign debt growth slowed as both sectors are more careful to take up loans amid a weakening rupiah while export revenues decline amid sluggish global (and domestic) economic growth.

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Statistics Indonesia (BPS) announced on Monday morning (04/05) that Indonesia’s inflation accelerated to 6.79 percent year-on-year (y/y) in April 2015. On a month-to-month basis, Indonesian inflation was recorded at 0.36 percent in April. Although this result is in line with analysts’ previous projections, April inflation realization is in sharp contrast with the ‘usual’ inflation pace in the fourth month of the year. Usually, Indonesia records slight deflation in April as prices ease amid the peak of the harvest season.

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Inflation in Indonesia is expected to accelerate to 6.80 percent year-on-year (y/y) in April 2015, from 6.38 percent y/y in the previous month, according to the central bank of Indonesia (Bank Indonesia). As global oil prices have somewhat recovered from their recent lows, they add inflationary pressures in Indonesia (higher transportation costs). On a month-on-month (m/m) basis, Indonesian inflation is expected to be around 0.35 percent in April. This figure would be in sharp contrast to ‘normal’ April inflation.

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