The central bank of Indonesia (Bank Indonesia) expects inflation to moderate to 4.5 percent in 2014 if the country's current account balance can be turned into a surplus. Currently, Indonesia's trade balance shows a deficit as global demand for Indonesia's commodities has reduced due to international economic turmoil, while Indonesia continues to import large quantities of oil. If the deficit can be reversed into a surplus it will curtail inflation and automatically have a positive impact on Indonesia's currency (IDR rupiah).

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The central bank of Indonesia, Bank Indonesia, has raised its benchmark interest rate (BI rate) and deposit facility rate (Fasbi) by 50 bps to 6.50 percent and 4.75 percent respectively. Bank Indonesia governor Agus Martowardojo said that this policy change is necessary to keep Indonesia's inflation figure within the target range. Last month, prices of subsidized fuels were raised by the government, which led to higher inflation in June (5.90% YoY). However, the impact of higher fuel prices is expected to make a deeper impact in July.

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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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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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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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