Newly inaugurated Bank Indonesia Governor Perry Warjiyo seemingly does not want to wait until the planned 27-28 June 2018 monthly monetary policy meeting to take action. Bank Indonesia announced that it scheduled an additional (ad hoc) policy meeting for Wednesday 30 May 2018. It is assumed that Bank Indonesia will raise its benchmark interest rate again by 25 basis points (to 4.75 percent) at this occasion in a bid to curtail capital outflows and defend the rupiah (which has been under heavy pressures in recent months).

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In line with our expectation, the central bank of Indonesia (Bank Indonesia) raised its benchmark interest rate (BI 7-Day Reverse Repo Rate) by 25 basis points (bps) to 4.50 percent at the monetary policy meeting in May 2018 that was concluded today (17/05). Agus Martowardojo, Governor of Bank Indonesia, added that the deposit facility and lending facility were raised to 3.75 percent and 5.25 percent, respectively.

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There is a big possibility that the central bank of Indonesia (Bank Indonesia) will raise its benchmark interest rate (the 7-day Reverse Repo Rate) at the monthly policy meeting in May (scheduled for 16-17 May 2018). Bank Indonesia Governor Agus Martowardojo confirmed that Bank Indonesia is currently preparing "strict and consistent monetary policy measures, including the adjustment of the benchmark rate, as the central bank gives priority to market confidence and macroeconomic stability".

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In its latest East Asia and Pacific Economic Update, the World Bank is optimistic about Indonesia's recent economic performance as well as its future prospects. The country's FY-2017 gross domestic product (GDP) expanded at the fastest pace in four years, led by stronger investment and net exports. Meanwhile, its current account deficit narrowed to a six-year low, while the central government's budget deficit reached the lowest since 2014, on the back of stronger global trade and strengthening commodity prices.

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Moody's Investors Services, one of the world's prestigious credit rating agencies, upgraded Indonesia's long-term, foreign currency-denominated debt rating to Baa2 (with a stable outlook), the second-lowest investment grade rating, on Friday (13/04). Moody's cited increasingly credible and effective fiscal and monetary policies as key reasons for the upgrade. The latest upgrade puts Indonesia on par with India and the Philippines.

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The central bank of Indonesia (Bank Indonesia) will conduct its final monthly policy meeting for 2017 on 13-14 December. Based on statements made by Bank Indonesia Deputy Governor Dody Budi Waluyo on Wednesday (06/12) at Bloomberg's Year Ahead Asia Conference, the benchmark interest rate of Indonesia will likely remain unchanged at 4.25 percent at this year's final policy meeting.

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The International Monetary Fund (IMF) released several preliminary statements related to the latest visit of a IMF team, led by Luis E. Breuer, to Indonesia (the visit took place between 1 - 14 November 2017). Overall, the team sees the continuation of good economic growth in Indonesia, supported by prudent macroeconomic policies, improved global GDP growth and rising commodity prices, as well as sustained efforts to strengthen the nation's competitiveness.

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Today, the central bank of Indonesia (Bank Indonesia) decided to keep its key interest rate - the seven day reverse repo rate - at 4.25 percent, a decision that had been expected by most - if not all - analysts as there have been rising pressures on the rupiah exchange rate after two surprise rate cuts in August and September, while there remain plenty of external matters that make investors careful about investing in emerging market assets.

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Bank Indonesia held its key rate at 4.25 percent at the October 2017 policy meeting. This decision was in line with expectations. In fact, previously, Bank Indonesia officials had already indicated that they would pause their eagerness to ease monetary policy. Since January 2016, the central bank of Indonesia had already cut the benchmark interest rate eight times from 7.25 percent to 4.25 percent in an effort to boost economic growth.

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It was not a total surprise. In fact, signs were on the wall. On Tuesday (22/08) the central bank of Indonesia (Bank Indonesia) decided to cut its benchmark BI 7-day (Reverse) Repo Rate by 25 basis points to 4.50 percent at the August 2017 policy meeting. It was the first time since October 2016 that Bank Indonesia altered its key rate. Meanwhile, the deposit facility and lending facility rates were also cut by 25 basis points, to 3.75 percent and 5.25 percent, respectively.

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As expected, Bank Indonesia cut the benchmark interest rate at its monetary policy meeting on 17-18 September 2024. The BI rate was cut by 25 basis points (bps) to 6.00 percent, while also lowering the deposit facility and lending facility rates by 25 bps to 5.25 percent and 6.75 percent, respectively.

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When global markets became really confident that the US Federal Reserve would cut its benchmark interest rate in September 2024, there occurred a sort of relief rally that is visible in Chart A below. Amid the increase in risk appetite, Indonesian stocks and the rupiah rate strengthened. Chart A shows that this rally started in late-July or early August 2024.

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Over the past month, expectations of a looming interest rate cut in the United States (US) have only grown. The US Federal Reserve is widely expected to start cutting its benchmark interest rate at its policy meeting scheduled for 17-18 September 2024. In fact, the question seems to be whether it’ll be a 0.25 or 0.50 percentage point cut.

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As usual, we are going to take a look at the US Federal Reserve’s monetary policy as policy changes in the United States (or market perceptions about approaching policy changes) impact on the Indonesian rupiah rate as well as on monetary policy that is set by Indonesia’s central bank (Bank Indonesia).

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In line with our projection, the central bank of Indonesia (Bank Indonesia) decided to raise its benchmark interest rate by 25 basis points (bps) to 6.00 percent after its October 2023 monetary policy meeting (held on 18-19 October 2023). Meanwhile, it also raised its deposit facility and lending facility by 25 bps, each, to 5.25 percent and 6.75 percent, respectively.

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The central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate at 5.75 percent at the two-day policy meeting on 20-21 September 2023. The lender of last resort also kept its deposit facility and lending facility rates at 5.00 percent and 6.50 percent, respectively.

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At the latest monthly monetary policy meeting (held on 24-25 July 2023) the central bank of Indonesia (Bank Indonesia) decided to keep its benchmark interest rate (the Seven-Day Reverse Repo Rate) at 5.75 percent. The lender of last resort also kept its deposit facility and lending facility rates at 5.0 percent and 6.5 percent, respectively.

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In our previous report we expected to witness a calmer international context as the US Federal Reserve was assumed (by markets and most analysts) to have ended its monetary tightening phase.

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In line with expectations, the central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (BI 7-Day Reverse Repo Rate) at 5.75 percent after the two-day policy meeting on 15-16 February 2023. It also kept its deposit facility and the lending facility at 5.00 percent and 6.50 percent, respectively.

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As expected, the central bank of Indonesia (Bank Indonesia) decided to impose a 50 basis points (bps) interest rate hike after concluding its two-day monetary policy meeting on 16-17 November 2022.

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