Indonesia holds repo rate at 4¼% as domestic growth gains momentum

By Tali Rackner

Minneapolis, Nov. 16 – Bank Indonesia said its board of governors decided to hold the BI seven-day reverse repo rate at 4¼% at its meeting held Nov. 15 and Nov. 16.

The board said in a news release that its decision was consistent with efforts to maintain macroeconomic and financial system stability and build economic recovery momentum, while paying consideration to global and domestic economic dynamics.

The policy rate, it said, is believed to be adequate to maintain inflation within the target corridor and keep a healthy current account deficit.

Since its last meeting, the board said global economic gains continue to expand and is “predicted to accelerate by 3.6% on 2017 and 2018 on the back of growth in China, Japan and Europe that has beaten previous expectations, coupled with solid economic gains in the United States.”

Meanwhile, domestic economy in the third quarter gained momentum, with a more balanced growth. Domestic economic growth was at 5.06% year-over-year in the reporting period, up from a stable 5.01% year-over-year over the past two periods.

The rupiah depreciated against the dollar in October, by an average of 1.63% to Rp 13,528 per dollar, as a result of external factors, the board said.

In October, CPI inflation stood at 0.01% month-to-month and 3.58% year-over-year. The month-to-month rate was below the average in October for the past three years of 0.18%. As a result, inflation was at 2.67% year-to-date.

“Bank Indonesia shall remain vigilant of the risks, including the global risks linked to the plans to tighten monetary policy in several advanced countries, as well as domestic risks, such as the limited growth in household consumption and banking intermediary,” the bank said in the news release.

The bank also voted to keep the deposit and lending facility rates at 3½% and 5%, respectively.

The bank trimmed each of the rates by 25 bps in September, as previously reported.

© 2015 Prospect News.
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