Indonesia clips repo rate by 25 bps to 4¼% amid ‘controlled’ inflation

By Susanna Moon

Chicago, Sept. 25 – Bank Indonesia said its board of governors again decided to lower the BI seven-day reverse repo rate by 25 basis points, this time to 4¼% from 4½%, at its meeting held Sept. 20 and Sept. 22.

The decision comes amid low inflation, which is expected to remain until the end of year, and levels for 2018 and 2019 are forecast to stay below the mid-point of the target range, and “account deficit under control within a healthy range,” according to a bank statement.

Inflation “was controlled” below expected rates with CPI inflation at 2.53% year to date in August or 3.82% year over year “after supply improved as demand returned to normal in the wake of Eid-ul-Fitr and the school holidays, combined with government policy and close coordination with Bank Indonesia,” the bank noted.

Core inflation posted the lowest rate for the past three years, the bank added.

The inflation target is 4% plus or minus 100 bps in 2017 and 3.5% plus or minus 100 bps in 2008 and 2019.

Outside risks include Federal Reserve rate hikes and “U.S. balance sheet normalization plans,” the bank said.

The bank also voted to lower the BI seven-day reverse repo rate 25 bps to 4¼% from 4½% and the deposit and lending facility rates 25 bps to 3½% and 5% respectively, effective Sept. 25.

© 2015 Prospect News.
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